Merchants Allowed to Charge Visa/MasterCard Swipe Fees Today

A legal settlement from last year between merchants on one side and Visa and MasterCard on the other will allow merchants to begin charging an additional fee if you use your Visa or MasterCard-branded credit card. (Learn more from Consumer-Action.org) This will allow them to pass along the card processing fees to their customers, which are usually about 1.5-3% of every purchase.

I don’t expect many merchants to take advantage of this opportunity, but I guess we won’t really know until we see things in action. The fact is that many smaller merchants were already charging different prices, creating convenience fees, or imposing minimum transaction amounts long before laws and lawsuits started legally permitting it.

I think the real question is whether the new opportunities afforded by this settlement will lead to larger merchants like Target, OfficeDepot, or Safeway to start charging more at their registers. Those who use Visa- and MasterCard-branded debit cards and pre-paid are excluded from the settlement, so you won’t be paying extra fees for those. Similarly, American Express has a separate agreement prohibiting merchants from passing on their processing fees and was not a party to the Visa/MasterCard settlement.

There are still 10 states that formally ban merchants from passing on their card processing fees, regardless of any settlement: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. Too bad Washington isn’t on that list, but I wouldn’t be surprised if it gets added after a few people complain.

Since debit and pre-paid cards are excluded, this could be added encouragement to try some of the tricks using Vanilla Reloads and other cash-like gift cards that people have been purchasing from drug stores, office supply stores, and the like. The $3-4 fee for a $500 gift card is less than a 3% “convenience” fee for using a credit card. Yes, you still have to buy that gift card with a credit card to earn some miles or points, but I don’t expect all merchants to adopt a convenience fee. So my strategy would be to find those that don’t, buy and reload my pre-paid cards there, and then spend the pre-paid cards at merchants that do charge a fee. Or just use American Express at merchants who accept it.

My guess is this will probably all blow over and turn out not to be a big deal, but it’s nice to know there remains a workaround.