The Reality of Surcharging Fees in the US

Beginning in January 2012, merchants could charge up to a 4% premium for anyone who uses a credit card to make a purchase. A settlement between credit card companies and merchants caused this fee.  The settlement is the result of a lawsuit from 2005 filed by large retailers against credit card companies. These credit card companies like MasterCard and Visa charge retailers an “interchange” or “swipe fee” for the privilege of allowing credit card purchases in their stores. Merchants now must face the decision whether to take the risk of collecting the fee or potentially driving customers to opponents who do not collect the fee. Retailers claimed that these companies created swipe fees in an anti-competitive way. Many processing companies, such as USB Payment Processing encourage small business owners not to add the charge for the fear that it may actually be harmful in the long run.

Marc Reibman, president of USB Payment Processing had this to say about surcharge fees: “As a small to mid-sized B2B company specializing in credit card processing, we have recommended our merchants not to add surcharge fees. It is not worth the risk of losing loyal customers. However, if small businesses do choose to add the surcharge fee, make sure to present the fee in a positive manner. For example, ‘building the fee into the cost of the product so that when customers use cash or debit, they are receiving a discount.'”

These swipe fees on credit cards generally charge from a range of 1.5-3%. Banks lowered these fees in order to have retailers claim checkout fees by passing the charge to the customers. However, there is a way around these fees, consumers can avoid it by using their debit card or cash to make purchases. Any retailer willing to use this surcharge must inform customers of it. Retailers must let consumers know with a sign on the door if any surcharge is added although how much it is does not have to be told until point of sale, when customers are at the register. The fee will have its own line item on the receipt so that it is easy to spot. In reality, customers have the choice of cash, debit or credit; the only difference is that credit now comes with a fee. It is beneficial to remind consumers that this is a credit card issue – not a retailer issue.

In a recent article by Michelle Latham, she thoroughly discusses the negative aspects of the surcharge companies want to implement. She claims that the charges will be the downfall of many small businesses due to the rising cost retailers face.

Should your customers receive check out fees? No, and here’s why: large retailers, like Target, Wal-Mart, and Home Depot have publicized that they have no intention of charging extra fees. Companies such as these are not in favor of the settlement and will continue to charge the way they have in the past.

It has also been discovered that checkout fees of any kind are illegal or frowned upon in several states. Ten states protesting the fees have already passed laws making them illegal. An additional 13 states have similar bills up for deliberation; more states are anticipated to follow these gestures.

Another reason this charge is frowned upon by large retailers is because it is difficult for these retailers to differentiate premium cards from others. In order to distinguish them several expensive and time-consuming measures must be implemented. On top of that, the charge alone will have its own swipe fees, raising the fees collected by credit card companies.

 This could be detrimental for small or independent businesses because       swipe fees can be a lot to take on for them. Besides this, another problem could be the consumers who aren’t pleased with the extra charges. Loyal consumers are the foundation of small businesses, meaning that retailers would rather not anger them. Most consumers don’t take kindly being charged for stuff that once was free.

 The original plan to lower swipe fees merely grew into a settlement that does not reduce fees earned by retailers. Now, businesses must decide to bear the costs of swipe fees, add the surcharge or raise prices to cover them. Since 2000, credit card swipe fees have increased immensely. Retailers are starting to find it much more difficult to cover these rising costs on their own.

The best resolution for these retailers is for them to locate payment processing companies like USB that ensures little to no fees. USB offers several Member Benefits to its merchants that off set processing costs, including free advertising on our website. At the rate things are going, it appears the checkout fee is dead before it even had a chance to take effect.

USB Payment Processing can offer a savings on more than just your processing rates with My Business Network. It’s a program exclusive to USB where you can advertise your business, print coupons, offer deals and bring new customers to your business for free.

For more information feel free to contact us at 410 828 4286.


One Response to The Reality of Surcharging Fees in the US

  1. Pingback: Declare Independence with your Rewards Card | Upgrade to Smart Processing

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