Credit card surcharge: New 4% credit card fee for customers in January 2013

Most customers are surprised to find out that there is a new 4% credit card surcharge when they pay with a credit card; online and in stores. Merchants are now legally allowed to charge customers up to an extra 4% for using their credit cards according to a Time Jan. 25, 2013, report.

“Starting on Sunday, retailers will be allowed to tack a surcharge of up to 4% extra onto your tab if you want to pay with a credit card.”

For years, most credit card issuers have been charging merchants “so-called interchange fees” which earned credit card companies a lot of money.

“Under a multi-billion dollar proposed legal settlement, some merchants can begin this Sunday to charge consumers for using a credit card,” reports CBS Pittsburgh and provides a video about the new credit card surcharge.

Many customers are not aware of the new credit card surcharge and many customers have been unaware that credit card issuers have been charging merchants credit card fees for years. The fee that credit companies charge merchants might be anywhere in the range of 2% or higher.

After the multi-billion dollar proposed legal settlement, merchants can do to customers what has been done to them for a long time; charge customers a credit card fee; -- up to 4%.

“In a contentious legal ruling that still is being disputed, a U.S. District Court determined last year that merchants are allowed to pass along the cost of those credit card interchange fees to customers,” reports Time.

Not all states and not all credit card companies are involved in the new credit card surcharge changes. The credit card surcharge does include Visa/Mastercard but not American Express.

Some states have protection laws for customers regarding credit card fees and surcharges including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.

However, as with most laws, whether the credit card protection law in each one of those 10 states is being followed or not is a different story.

Since Pennsylvania is not one of the 10 states that prohibit credit card check-out fees, Pennsylvania's Attorney General Office says that it is going to watch very carefully to “make sure that nobody violates the Pennsylvania Consumer Protection Act.” Under the Consumer Protection Act, merchants should provide “clear and conspicuous advance disclosure before the point of sale of any such fees or surcharges.”

The watchdog group Consumer Action emphasizes that different credit cards will have different surcharges and it is the customers’ responsibility to be aware of what store charges what fee for what credit card.

“If surcharges do become the norm, expect credit card promotions touting low- or no-surcharge transactions to become part of banks’ marketing mix, similar to what we’ve seen with the gradual rollback of foreign transaction fees on many new card offers.”

The “low-or-no-surcharge transactions” slogan might also become an international favorite promotion because credit card users in other countries like Canada and New Zealand have voiced their opinion against credit card surcharges and the subsequent decrease in credit card usage meant a decrease in income for credit card companies.

Customers tend to spend up to twice as much by using credit cards. Banking expert Dennis Moroney told Time earlier this month that “credit cards are a big profit center for banks. They’re not going to let that revenue stream plummet over what’s essentially a 2% or 3% annoyance tax.”

Online purchases will most likely also be affected by the new credit card surcharge. Online merchants do not have to disclose the new credit card surcharge until a customer checks out. “Advocates worry shoppers will be too invested at that point to be dissuaded by the charge and will just suck it up.”

According to the Time report, it is consumer awareness that “will be the strongest deterrent against widespread credit card surcharges. Stores have to let you know if they’re going to add a surcharge with a sign on the door (although they don’t have to tell you how much it is until ‘point of sale,’ when you’re already at the cash register).”

It will be interesting to see how many stores will actually post a sign at the door informing customers that they have to pay an extra 4% credit card surcharge.

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