Last summer, an antitrust settlement between merchants, big banks and credit card issuers Visa and MasterCard all but did away with credit card interchange fees, or the swipe fees merchants pay to the networks to process consumer payments. While merchants – and by extension, consumers – received $7.2 billion in temporary relief from interchange fees, there’s a new fee that merchants can now charge consumers who pay with credit cards, called a checkout fee. It may be applied to credit card transactions in 40 of the 50 U.S. states, and does not apply to debit card purchases.
Checkout fees must be disclosed
The credit card checkout fee won’t sneak up and catch you unaware. Merchants are required to disclose that you’ll pay more for the “privilege” of using a credit card at their establishment, whether it’s online or brick and mortar. The checkout fee surcharge ranges from 1.5 percent to 4 percent, which not coincidentally is about what merchants have charged to recoup losses on interchange fees.
Do checkout fees make good business sense?
Retailers may have the right to ask for a checkout fee, but does it make good business sense? Many critics would say no, that it will only be perceived as gouging by customers. Plus, higher fees will serve to devalue rewards credit cards, which would translate to lost revenue for banks. Ultimately, consumers will choose those retailers who offer the best deal, so competition will likely prompt them to avoid widespread fees. Only stores with unique products may stand out enough to get away with charging checkout fees.
No checkout fees for American Express
The checkout fees agreement is with Visa and MasterCard. Curiously, American Express does not allow merchants to add checkout fees, but it charges the highest interchange fees of all credit card issuers. Big-box retailers are displeased with the whole thing, and if you the consumer live in a state other than California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma or Texas (where checkout fees are banned), remember to vote with your wallet if checkout fees seem like a raw deal.