The Credit Card Swipe Fee

by Stephanie Berenbaum – January 30, 2013

A New Law You Need To Know About

Attention all credit card users!   Did you know there’s a new law that just went into effect that you need to know about?

In many states, it is now legal for retailers to pass the fee the credit card company charges them on to YOU.  Which means you might just find yourself with a hefty sum added to your next purchase!

Nothing In Life Is Free

Many of us don’t even know about the fee structure credit card companies have with retailers.  Credit card companies charge the retailers a so-called “swipe fee” -  anywhere between 1.5-4% of the purchase price.  This fee is a huge expense for retailers – many of whom already are dealing with thin margins.

The new law allowing the pass through of this surcharge to consumers is the result of a huge settlement from a dispute between credit card companies and retailers about these fees.  But now it looks like their dispute is becoming the consumer’s problem …

Fee Facts

Retailers are not obligated to pass this fee onto the consumer – and many likely will not add it to your bill. But they are obligated to let you know if they are going to charge you.  And there are exceptions: if you live in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma or Texas this new law does not apply due to existing laws prohibiting surcharges.  Additionally, it only covers credit card transactions – not debit card transactions – made with a Visa or  Mastercard.  The law does not apply to American Express and Discover Card.

Small Businesses, Big Decisions

Many retailers are saying they will not pass the fee on because they don’t want to scare consumers off or create an extra burden in this economy. But it will be interesting to see what small businesses choose to do.  You may not realize it, but because they don’t have the negotiating leverage of a huge corporation, small businesses often pay higher percentages to credit card companies than the big retailers.  If they pass the fee on, will people still continue to support small businesses, or just give up and head to Walmart?

The Bright Side?

Looking at it from another angle – if a store does start charging a credit card fee, you can in essence get a discount by paying cash and avoiding the fee altogether. We all know that we tend to spend way less when paying cash than we do charging everything to our card.  So maybe this whole fee uproar will get Americans to stop charging so much and stop spending money they don’t have? –It may be wishful thinking, but a Fab & Fru girl can dream, can’t she?

Would you stop going to a retailer who passed the swipe fee onto you? Would it make a difference to you if it was a large chain vs a mom and pop store? 

Tell us what you think!


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5 Responses to “The Credit Card Swipe Fee”

  1. Lesley says:

    I think I’m glad I live in California where this is prohibited! But lets face it, if a retailer knows they are (on average) paying an extra 2% per transaction based on how many people use credit cards…they have already rasied prices to cover it. In the future how they choose to do business…keep your business costs to yourself. I don’t want to pay a fee for walking into a brick and mortar store because they pay RENT, I don’t want to pay a fee for using my card. It’s part of the cost of doing business – that is my opinion.

  2. lak says:

    great post! and, yes, it would make a difference: although I definitely try to avoid credit cards to begin with, I would mind paying the extra fee less for a mom and pop than for a large retailer.

  3. Sue K says:

    I agree with lak that I would definitely be more irritated with a large retailer charging it than a mom and pop. Regardless, it I know in advance that there is a surcharge, I can always hit the ATM at my bank too. Also it could mean that more people will be using checks again. I do get charge a surcharge for one thing that I belong to if you use a credit or debit card They send the bill plenty in advance giving you plenty of time to either get there and drop it off or send a check. If it is at the due date then you have t make the decision of whether the cost of my time and gas to drive there is worth more than the surcharge which is about 4 bucks onto the quarterly bills or more for the one that comes once a year.

  4. Molly says:

    I disagree with the author of this piece who says “Look at the bright side. If you pay with cash, it’s like getting a discount”. Errr… it isn’t. You’re simply avoiding a fee on top of the price. Only a used car salesman would try and come up with such an angle!

    However, if you use your Amex or Discover card, no fees are allowed. This will be a boost in the use of those cards in the states that allow the fees.

  5. Kara says:

    I truly believe stores should start handing out an extra 10-20% discount to those of us that use only cash or debit cards. Perhaps more people would drop the credit cards and begin using cash again. I find it infuriating when a store clerk (sorry, I know you are required to do so) says, “Would you like to get 20% off of today’s purchase by opening a credit account?” Almost all store accounts phase into VISA or MasterCard – and then the stores get charged for the “convenience.”

Any Thoughts?