New York – Retailers in 40 U.S. states can now charge up to 4 percent extra when consumers pay for goods and services with a credit card.
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These so-called “checkout fees” went into effect January 27, and do not apply to debit card payments. The fees are illegal in California, New York, Texas and seven other states.
It is up to individual businesses to decide whether or not to add the fee. They also need to disclose it to consumers.
The surcharge is the result of the biggest anti-trust settlement in U.S. history. In 2005, a group of merchants claimed that MasterCard, Visa, and nine other companies including JP Morgan Chase & Co conspired to fix the fees that stores pay to accept credit card purchases.
After years of negotiations the case, which was in the U.S. District Court for the Eastern District of New York, settled. The credit card companies and banks agreed to pay $6 billion to the merchants who sued.
As part of the settlement, the merchants are allowed to charge customers a fee equal to the cost of accepting cards, typically 1.5 percent to 3 percent of the purchase price.
“While it is legal to charge extra, there are still limitations,” said Kathy Li, the San Francisco director of Consumer Action, a consumer advocacy agency. “For example, what kind of cards can be charged? What cards can’t be charged?”
To avoid the surcharge, consumers can pay with cash or debit cards. And when shopping online, “there’s always PayPal or other electronic payment options that can’t charge extra,” said Li.
Wahoo!!! The IRS is going to have a field day with all these cash payments. I like how this case was settled in N.Y. were apparently it is illegal to charge any fees.
Even though it’s illegal in NY, there are ways around it for stores, they can raise the price of an item by 4% and than offer a 4% discount for customers paying in cash.
This is what the gas stations in NY do, in order to get around the fact that it’s illegal to raise the price for paying by credit card.
so how do they charge more for gas in N.Y.C. if according to this news you can’t
The credit card companies “lost” and now the consumers lose more!!
Stupid people!
So let me get this straight…. why did these retailers need to sue? Why not just raise prices by 4% and tell your customers that prices went up because the costs of doing business went up. Now the CC companies have to pay out $6 billion. Where do you think they are going to get that money from? From their magical unicorn that poops gold? From their money tree? No. From the CONSUMER. So now the retailers will start charging us a 4% fee AND the CC companies will raise rates and fees and/or make cutbacks in perks. Greedy retailers win, CC companies will break even, and the consumer will lose TWICE as much….
Yay!?!? I think not.
Simple! Use cash!!
This is a terrible blow to the consumer and retailer. Consumers don’t always have the cash available to pay and count on the float ( up to 7 weeks) when they will have the money to pay the CC bill. The CC rewards are an extra perk as well and enable the consumer to travel ( and spend more money). CC Spending will down. Retailers AND CC companies will show less income. THIS NOT A WAY TO STIMULATE AN ECONOMY
Whats interesting in all this that even though its illegal NY still charges a “convenience fee” when trying to pay a parking ticket using a credit card.
PMOinFL (post # 6). You obviously have no clue on how credit card companies operate with retailers. Retailers are ALWAYS the looser! Retailers take a 2% or 3% loss + a $0.30 or $0.50 transaction fee for every single order they take via credit card. THEN, when the customers files a chargeback or uses a fraudulent card (because the credit card companies “client” had his card compromised) they deduct the funds from the retailer, even though it’s not the retailers fault, and the retailer looses again. So please explain how retailers are going to win? The ONLY winner is the credit companies.
I’d like to know how this would effect web-retailers. Will they need to raise their prices?
Perhaps consumers will boycott retailers that charge extra.
Visa and MasterCard has sent out mail advisory notices saying that IT IS LEGAL in ALL States including NY and CA to charge these fees from the consumer.
Just wait, it will hit the taxis soon…
We accept all cards including the elusive AMEX.
There is a cost that has to be passed on to all clients, there is no way to ignore it. As we see frum clients pull out these signature cards which pile extra costs on top of normal credit card fees we quietly cringe. I think it is time that it becomes legal to charge more or rebate to distribute the cost fairly.
I do still appreciate that Credit cards are convenient and offer float, they might increase spending over a cash paying customer. I also know there are those among us that have made a game of using the most costly (to the vendor) cards to get a few more miles, often then trying to return goods in a way that still gets them the miles and always costs the merchant.
I always thought that credit cards are the best way for IRS to detect tax evasion.
For example if they see 50k in credit card purchases, then they know that such a business probably received around 100k that year.
If the business owner files only 75k -…………… 103 years in prison!