Starting
January 27, 2013
Everything
you buy could potentially cost more starting this Sunday (1/27) when merchants
will be legally allowed to add up to a 4 percent surcharge to every purchase
made with a credit card.
Historically,
merchants have been prohibited from imposing a surcharge when a customer uses a
credit card because of a ban on the practice contained in contracts that banks
and credit card companies have with sellers. That all changed last November
when a federal judge preliminarily approved a settlement in an antitrust class
action case brought by retailers against Visa, MasterCard, and a number of big
banks. Part of the settlement, eliminating that ban on surcharges, goes into
effect on January 27, 2013.
While
widespread adoption of a credit card surcharge is not expected in the short-run,
consumer advocates worry that over time they will become commonplace, and that
surcharge abuses that developed in other countries will be replicated here.
"This
outrageous, new fee should make every shopper think twice before plunking down
a credit card," said Edgar Dworsky, founder of ConsumerWorld.org.
"If a national sales tax of 2, 3, or 4 percent were being proposed,
everyone would be up in arms. Yet, nearly the equivalent of that - an up to 4
percent credit card surcharge pushed for by retailers - has flown under the
radar with seemingly little scrutiny, criticism, or concern for consumers'
pocketbooks.
Under
the new rules:
. Sellers will only be allowed to surcharge
customers for the actual costs of processing credit card transactions
(typically 1.5 to 3 percent) or 4 percent, whichever is less.
. Complicated rules allow retailers to choose
the cards to which a surcharge
will apply. However, American Express says while its agreements allow
surcharges, a clever provision in them will likely mean that no surcharges can
be applied to AMEX cards.
. Debit cards and prepaid cards will not be
subject to a surcharge.
. Brick and mortar retailers will have to post
a notice at the store's entrance advising customers that a surcharge applies on
purchases made with a credit card. However, only at the point of sale must there
be a disclosure of the exact percentage. In addition, sales receipts will have
to itemize the exact amount of the surcharge.
surcharge
notice
<http://usa.visa.com/download/merchants/sample-surcharge-disclosure-signage.pdf>
. Online sellers only have to disclose that a
surcharge will be imposed on the page of the website where credit cards are
first mentioned. In a typical online transaction, however, selecting the form
of payment is usually the final step before completing the transaction.
Consumer advocates believe this late a disclosure will turn off shoppers who
may feel they were hoodwinked into almost completing the buying process before
being advised that a credit card surcharge applies.
. Stores must continue to abide by state laws
that prohibit or restrict credit
card surcharges in California, Colorado, Connecticut, Florida, Kansas,
Maine, Massachusetts, New York, Oklahoma and Texas.
Consumer
World has many concerns as the U.S. enters the era of credit card surcharging:
. Having to pay 2 to 3 percent more for every
item charged to a credit card will be a financial burden for many families in
these tough economic times. Credit card issuers are said to collect an
estimated $25 billion in credit card acceptance fees from merchants annually.
If that cost is passed onto consumers, it could well put a drag on the national
economy.
. Prices of goods today already have built into
them the seller's cost of providing
credit. Most sellers are not likely to drop prices by that embedded
2 or 3 percent. As a result, consumers who pay with a credit card will be
charged twice for that privilege: once because the price already includes the
seller's credit costs, and again because they will have to pay another 2 or 3
percent.
. Surcharging in the U.S. will probably follow
the same unsettling pattern it did when first introduced in the UK and in
Australia. Surcharging credit card use began in 2003 in Australia. At first,
very few merchants charged extra fees. Then a few like some airlines and some
hotels added surcharges. Next came taxis and some utilities. Then more
conventional retailers like supermarkets and department stores followed suit.
Today,
approximately one-third of sellers in Australia charge extra when a customer
uses a credit card. And unfortunately for consumers there, many sellers have
turned the surcharge into a profit center, charging more than their actual cost
of accepting credit cards - as high as 10 percent, according to some reports.
As result, the federal government there had to impose a limit on surcharges
that will go into effect in March. The UK, which experienced a similar growth
pattern and subsequent abuse, will be imposing restrictions in 2013.
. Shoppers who switch to a debit card or cash
will be giving up important federal protections such as the right to chargeback
purchases that are defective or never received. And those eschewing premium
credit cards will lose valuable benefits such as double the manufacturer's
warranty, collision damage waiver on car rentals, and points/miles/cashback.
. There are no disclosure requirements in the
settlement agreement related to advertising. Shoppers thus may be lured to a
retailer because of a price in an ad, only to learn once in the store that they
really have to pay more than they expected.
"Any
seller that implements a surcharge is doing so at its own peril," warns Dworsky.
"We are advising consumers to simply shop elsewhere to avoid having to pay
any extra fees."
Dworsky
hopes that more states will pass legislation to ban credit card surcharges,
and that the Consumer Financial Protection Bureau will consider regulations to
head off possible abuse.
Source:
<http://consumerworld.wordpress.com/2013/01/21/credit-card-surcharges-up-to-4-coming/>
Add your comments about credit card surcharges, or read others.
Consumer
WorldR, launched in 1995, is a public service, non-commercial consumer resource
guide with over 2000 links to everything "consumer" on the Internet.
Edgar Dworsky, an avid bargain hunter, is the founder of Consumer World, editor
of MousePrint.org - an educational site devoted to exposing the fine print
loopholes in advertising, and a former Assistant Attorney General in the
Consumer Protection Division of the Massachusetts Attorney General's Office.
Starting
Sunday January 27
No
surcharge for using a debit card
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