As of January 27th, 2013, savvy shoppers have one more variable to consider when deciding where to buy their goods. This marked the first day that retailers had the right to pass the cost of using credit cards on to their customers directly using what is called a checkout or swipe fee.
The fee, which may begin popping up at registers near you, is the result of a 2012 settlement reached between retailers and credit card networks. For years those networks have charged a swipe fee of between 1.5 and 3.5% per credit card purchase, used to cover processing fees and fraud. Merchants have long been against the fees, saying that they are a hidden cost that they are forced to pass along to the consumer in the form of higher prices. This settlement is the second victory for retailers in their struggle to come to grips with swipe fees. The first was the Durbin Amendment, which set a limit on debit card fees of 21 cents per transaction. The settlement regarding credit cards didn’t cap the fees, but it did give retailers the option of passing the cost on to their customers.
Even though it’s legal now, it is an option that many experts don’t expect big retailers to exercise. It’s tough, especially for large retailers, to get away with a two-tiered price structure. Do you advertise the lower, cash price, and then explain the higher one at the register, or do you assume your customers will put their purchase on plastic and advertise the higher price? Not to mention, the studies that say consumers spend more money when they use a credit card. So, if you try to encourage all cash transactions you may actually be teaching your customers to be more frugal.
These are questions that will have to be answered by individual retailers. Here are the facts that consumers need to know:
- Brick and mortar stores will display their swipe fee policy at the door, or the register
- Online retailers must declare their inclusion of a checkout fee on their homepage
- Checkout fees are banned in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.
- Checkout fees don’t apply when using a debit card
- Stores can charge the equivalent of what they pay for the exchange fee, 1.5 – 3.5%
Many small business owners use company credit cards for the ease of invoicing purchases, fraud protection and to accrue rewards points. The question is, if retailers do begin passing the cost of each swipe on to consumers, will those advantages be seen as big enough to pay an extra 1.5 – 3%?
Depending on the level of adoption of these new fees by the retailers important to your household or business, they could add up to a substantial amount of your budget. Speaking with your accountant, financial planner, or banker about these fees, and their impact on your bottom line, is one way to make sure that you are truly on top of your finances in the New Year.
Electronic Payments Coalition