Visa, MasterCard Agree To Let Merchants Add Surcharges To Credit Card Purchases

Earlier this week, we told you that a settlement in a huge lawsuit between merchants and Visa and MasterCard was in the offing and that it could open the door to retailers tacking on surcharges to credit card customers. Well, that proposed settlement has come to pass, meaning you may soon be paying more for the privilege of using your credit card.

The settlement will result in a huge $6 billion payout — shared by Visa, MasterCard and banks like JPMorgan Chase and Bank of America — to the group of plaintiff retailers, which includes grocery giants Kroger and Safeway. The two credit card companies will also, at least temporarily, reduce fees to merchants.

But the biggest thing for consumers is that the settlement will alter the Visa and MasterCard’s longstanding policies against merchants adding a credit card surcharge or charging customers more than the price for a cash purchase.

According to the Electronic Payments Coalition, a group of banks, credit unions and payment card networks, any credit card surcharges will be limited to the amount of money the merchant pays to the credit card company.

So if a retailer is charged $.35/swipe by Visa, the most it can pass on to you is $.35.

Retailers who add the surcharge most post a fee disclosure to the consumer at the point of entry, point of sale and on the receipt.

In states where the law currently prohibits credit card surcharges, merchants will not be able to pass on the cost. Ironically, this case is before a U.S. District Court in New York, one of the ten states where surcharges are verboten. The others are California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma and Texas.

Among the allegations in the lawsuit, the plaintiffs claimed that Visa and MasterCard colluded to keep swipe fees — the amount of money they charge to retailers for each purchase — at high levels. This resulted in an anti-competitive atmosphere, alleged the retailers, who say they had no choice but to pay the high fees to both card companies.

Though American Express and Discover were not part of the lawsuit, neither of these companies have policies prohibiting merchants from charging extra to credit card users. Instead, their merchant agreements state that a retailer can not charge extra to use these cards if they don’t charge for using competitors’ cards.

So now that Visa and MasterCard have opened the floodgates to credit card surcharges, merchants are free to tack on the surcharge for Amex and Discover purchases.

Some argue that allowing merchants to pass on the swipe fee to customers is actually a good thing. They say it will add transparency to the whole process, letting customers see exactly how much retailers have been paying to Visa and MasterCard, especially on smaller purchases.

Additionally, it’s hoped that this settlement will spur Visa and MasterCard to actually lower their swipe fees to compete against each other. Instead of the two companies marketing themselves based on balance transfers and interest rates, we could see ads touting a credit card’s low swipe fees, giving consumers one more factor to consider when selecting a credit card.

But not everyone is happy with the settlement. Two plaintiff groups — the National Association of Convenience Stores (NACS) and the National Association of Truck Stop Operators (NATSO) — say they reject the settlement.

These groups say the settlement does not go far enough to introduce transparency into the transaction process. According to a statement, they claim that while the proposed settlement allows merchants to show consumers some of the costs associated with accepting credit cards, what retailers can actually tell consumers is limited by Visa and MasterCard.

“NACS does not accept this proposed settlement, and we reserve the right to fight it if other class representatives do accept it,” said NACS president and CEO Henry Armour. “There is plenty of time for merchants to make thoughtful decisions related to this proposed settlement. We hope and expect that, as they have the time to review it, many other merchants including class representatives will decide to reject this proposal.”


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  1. lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

    Good bye, 5% cash back on groceries and gas. I’ll miss you.

    • frank64 says:

      That’s what they said when the Card Act went through and I see more reward cards out there now.

      The rewards are really a scam though, we are getting a cut by screwing the merchants, non reward card users and cash customers. The merchant is forced to pay more for cards that are rewards, and doesn’t even know what is reward until he gets the bill.

      For rewards to be fair the merchant would need to have a choice to opt in. He would pay more but benift from the marketing beneiftis. Kind of like green stamps.

      • YouDidWhatNow? says:

        Merchants do not pay more for rewards cards. Period. Merchant accounts have a fixed discount rate…doesn’t matter if one Mastercard has rewards and another doesn’t – the merchant pays the same rate.

        • frank64 says:

          Not true at all. There are different agreements though, and maybe some don’t. It is my understanding that most do.

        • frank64 says:
        • ForTheRecord says:

          I had to reply when I saw this post. Merchants usually do get charged more for rewards cards and they don’t always pay a fixed rate. When you sign on as a credit card merchant if you pay a fixed rate you are probably paying the highest rate possible. The card processor is either going to estimate what percentage of your sales are from the rewards cards and come up with the fixed rate or just make the fixed rate the highest possible across the board for all cards.

          I have a merchant account and I looked at my statement before posting.and I counted 14 different Mastercard types(MC Business, MC Business World, MC Fleet, MC Purchasing, MC Corp, MC Enhanced Merit I, MC High Value Merit I, MC International Corp, MC International Standard, MC Elite, and more…) with discount rates ranging from 1.84% to 2.95%. Additionally you have a cross-border fee, MC Network Access and Brand usage fee, authorization fees, etc. And mind you, this is only MC. Visa has their own card types and associated fees.

          There’s almost no way of the merchant knowing what fee he’s going to pay prior to the sale.

          Granted, this is all the cost of doing business but it’s important that the consumer realizes that these costs influence the price of the goods/services that you are buying. There’s no such thing as a free lunch. If you’re getting rewards/cash back on your purchase, someone’s paying for it, and it’s not the credit card companies.

        • mcgyver210 says:

          I am a Merchant & you are so wrong…. I & many Merchants pay a tier based discount fee that is based on Qualified, Mid-Qualified & Non-Qualified. The way things are now I rarely if ever see the lowest rate which is Qualified but because of Rewards, Corporate, Government etc I usually pay the highest discount fee which is Non-Qualified. Also I never really know which rate it will be.

          I also don’t pass on cost to card users as of yet but there are no free rides so all my clients pay a portion of the fees even the non credit ones. We haven’t decided yet on if we will charge card users more than non card users but it isn’t out of the question just something we have always avoided.

          Consumers really don’t understand rewards are in reality paid mostly by merchants in the form of higher discount fees.

          • Smiling says:

            Which are then paid for, by customers. While you say you don’t pass on the costs, your prices have to be set at a level where you still make a profit, even with accepting cards, as does every other merchant. So, in essence, they are “welfare” for the middle class since they are a benefit that is being paid for by the merchant, which is ultimately passed to customers.

            I hope all merchants start passing the fees on and these cards do come to an end. I don’t want to pay for other people’s cash back. I can pay with debit or cash.

            • mcgyver210 says:

              Not sure I get what you are disputing here since I did say all my clients pay a portion of the discount fees since I am definitely a for-profit business. Non-Profit is a whole other story that needs to be looked at.

              This settlement will not make things better for merchants or consumers because Visa MasterCard has had a death hold on discount fees & has basically formed a Monopoly with no real competition for years. They let the Government charge fees but by the rules merchants can’t even know which cards are the most expensive to take since it may give them some insight as to who needs to be charged for a card.

              Now I am old school & firmly believe most merchants now days add fuel cost, card fees, handling fees etc as a way to up the ticket while advertising it cheaper up front forcing consumers to pay mandatory extra fees that should be disclosed upfront. All these fees are IMO a cost of doing business that must be passed on to end users same as all the business taxes consumers don’t have any idea we pay that lawmakers spend recklessly.

          • truthandjustice says:

            Here’s a merchant admitting EXACTLY MY POINT. Consumers — get ready to be charged CC fees TWICE.

            Truth be told . . . EVERYONE, whether currently paying by CC or cash or check, is ALREADY being charged a SURCHARGE for your purchases. That surcharge has ALREADY been built into the merchants’ pricing formulas, as a normal cost of doing business. Every product on the shelf ALREADY has a surcharge built into it’s pricing.

            So now, with these new surcharges, we will be getting surcharged TWICE. WOW — how incredibly well fairness and equity work in the free enterprise matrix. (/sarcasm on full throttle)

            • frank64 says:

              Well previously the merchant had no choice on how to pass on a cost, he couldn’t charge the person incurring it. Now they may have a little choice. This will mean he will be allowed to handle this cost like he does all other costs. We as consumers will have more choice too. We can take the cost of the service into account in our decision on using card.

              Some of the more important parts of this agreement are being ignored. The merchants negotiated lower fees for a set amount of time, and they are now allowed to band together. This coupled with the ability to charge customers directly if they want, gives them some power with the banks they never had. Both the banks and the merchants benefit from card use. most will be able to come to an agreement that means no surcharges, and less costs to the merchant. The merchants will probably keep a little, but so will we. At any rate it is much more fair than the way the banks are treating the merchants now.

      • pippenz says:

        At the base level interchange fees are being paid. There are about 60-100 different interchange categories and rates. Rewards being one of the highest. These discount rates can range from ~.4% – ~2.5%. These fees are set by the card associations (visa, mc) and charged to the merchant services banks.

        The merchant services folks then pass it along to you. They can do this in several ways:

        1) Fixed Discount Rate – ie merchant gets charged a fixed % (3.5% of every transaction for example) as you can see this more than covers all interchange categories, this is probably the worst billing setup for a merchant cost wise.

        2) Tiered Pricing – This structure takes the approx 60 interchange buckets and breaks them into a few categories (for example: Qualified, mid-qualified, non-qualified etc). These tiers are usually based on how you process the transaction (swipe vs keyed, avs present, level 3, customer code, tax etc). This structure can be good for merchants but is really dependent on the deal you strike with your merchant services bank.

        3) Interchange+ – This is the most transparent structure for merchant services billing. You pay the exact discount rate for the category that transaction fell under. You also pay the “+”. The + can range from 5-100 basis points (.05% – 1%) of the transaction fee amount. The more volume you have the better deal you can negotiate.

        There are also several strategies to get the best type of interchange rate (some cards can qualify for multiple categories, so you want to obtain the best one).

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  2. Thyme for an edit button says:

    Perhaps it shall soon be time to dust off Ye Olde Cheque Book

    • history_theatrestudent says:

      I will expect the check book in its physical form to be extinct by the time I die, and I’m only in my early 30s. Something such as money orders or cashier’s checks will still be around for larger transactions but its going all electronic, even physical cash may be rare by 2050.

      • longfeltwant says:

        Criminal enterprises require cash. You can’t buy cocaine with a credit card.

        • Tylosaurus says:

          Not even if you use PayPal?

        • Phred says:

          Long live cash!

        • HomerSimpson says:

          Not to worry…they’ll be carrying a lot more of it (yours) once this goes through.

          (criminal stroking gun): “Heh heh heh”

        • rambo76098 says:

          Which speaking of, don’t ever carry much cash, or if you have any sort of encounter with the police, they’ll claim you’re drug dealing and seize the money with no charges against you to fight.

          Good ole civil asset forfeiture…

    • lovemypets00 - You'll need to forgive me, my social filter has cracked. says:

      I thought that too, as my credit union doesn’t charge a per check fee, but I bet if people start writing more checks, those fees will follow.

  3. longdvsn says:

    Brought to you by the pickpocket lobby – here’s hoping everyone starts carrying cash again!

    • HomerSimpson says:

      Don’t forget about the Armed Robbery Gang!

    • frank64 says:

      Google Wallet and similar services could benefit. They could offer the merchants low enough fees so they woudn’t need to charge. This option will make it more palatable to charge for card use. They can say use Visa pay a fee, use GW no fee.

      As is brought up all the time (although exaggerate) cash has costs too. Also the banks benefit from card use, and do not want customers to have to think about charges. If this works, it would allow the merchants bargaining power to bring thier costs down so they don’t have to charge. I don’t think the majority of business will charge. They will just pay less.

  4. ahecht says:

    What most of the news stories are missing is that this is just a proposed settlement, and that two of the major plaintiffs in the case, NACS and NATSO, have rejected the settlement. Even if Kroger and Safeway accept the settlement, there is still a good chance that the lawsuit will go to trial, which could mean changes to merchant agreements that are quite different from what was proposed. See

    • ahecht says:

      I’ll also add that no matter what happens, merchants won’t be able to charge fees in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Those states represent 40% of the population of the US.

  5. jeremiahinpa says:

    What astounds me is the shortsightedness of retailers who claim that the high expense of credit card swipe fees create an business hostile situation.

    I argue that the cost of processing a credit card transaction is probably very much in line with collecting cash. From a daily business accounting perspective, the credit card sale is cleared and posts to the the account. For a cash sale, the drawer must be counted, balanced, posted, bills sorted, back office employees bonded against theft, cash pick up or deposits made, and the posting cleared by the bank in one or two business days. The cash business is tremendously more labor intensive and introduces a tremendous amount of potential for employee theft from their employer.

    I understand that with a service business, the cash option may be preferred by a small business owner as it allows for accounting transgressions from a tax prospective. But with an inventory and legitimate sales ledger, I cannot comprehend that the true cost of accepting cash (with all handling variables considered) is actually that much less expensive than processing a credit card transaction.

    What is the true cost of handling cash transactions? Such is not often considered in the business accounting, only the “Look what credit cards are costing us!”

    Likewise, this scenario does not even include incidents where the consumer votes with their feet by opting for businesses that accept credit cards. As recently as five years ago, I had attempted to make a purchase at a beer distributor (Sorry – Pennsylvania here… were we must buy our alcohol in stores that only sell beer or only sell spirits) that didn’t accept my credit card. I apologized and voted with my feet to the distributor a mile down the road that does accept credit cards. In five years, I have not yet returned to that location. Why should I? I never carry cash.

    • Extended-Warranty says:

      “I argue that the cost of processing a credit card transaction is probably very much in line with collecting cash”

      Well you are wrong.

      Cash fees are generally fixed. Credit card fees are generally a percentage of your sales. There’s a reason why you see fees on lower amounts. Not because the evil business owner wants to buy a second boat, but because it sometimes LOSES them money. No matter how much the consumer feels entitled to whatever benefits THEM, the business should be able to make that choice.

      • frank64 says:

        And credit card fees have been rising, so even if that were true before it is not now. It is funny that we customers are able to tell merchants what things cost them, it is very self serving. If cash cost the same, why would they have spent millions of dollars fighting?

        • z4ce says:

          Because they can get even better deal and extract additional value from cards?

          • frank64 says:

            It was extremely hard fought, over many, many years. They needed a leg to stand on to win.

            Why didn’t they go to court to lower the cost of anything else? why did they need to go to court? You don’t think the near monopolistic pricing power banks had, along with the rules that said they couldn’t pass it on directly to customers didn’t make the fees artificiality high?

      • z4ce says:

        Considering any merchant can sign-up for Square and get 2.5% with no swipe fee, any merchant paying more than that is just being lazy.

  6. SabreDC says:

    And now that everyone will be flocking back to debit/cash, how long before banks start trying the whole “$5/month to use a debit card” thing again?

  7. mary go says:

    If retailers want to truly be transparent then they should have to show us how much they are marking up our merchandise from their cost too. That would only be fair, right?

  8. SirWired says:

    Well, limiting the fees charged to what the merchant actually pays seems pretty fair to me.

    • mcgyver210 says:

      That could be fair but merchants generally don’t know the actual cost of your card until a monthly statement shows up & the $$$$s are taken even before the statement shows up.

      Visa, Master Card have been raising discount fees steadily for years with a mafia type of Monopoly because Merchants have no real choice because there is no real competition to force prices down.

      • Akuma Matata says:

        that could be changed with a terminal that could print those details.

        • mcgyver210 says:

          Visa Mastercard doesn’t want merchants to be able to do this which is exactly why discount fees are out of control. Visa MasterCard prefer the way it is now because they are raking in very large profits on both ends. They even falsely claim IMO they lose money on fraud etc when in reality the merchant pays for this with more fees on top of the loss. This is also another reason I NEVER get mad when a merchant ask me for ID when using my card. I instead look at it as the merchant is protecting their interest & mine.

  9. lauxdw says:

    So…you’ll charge more for a Visa card, you won’t accept a check. That leaves, gasp!, cash?!

  10. frank64 says:

    As part of the agreement merchants will be able to band together to negotiate lower fees. Sounds good to me. I did think they couldn’t do this due to collusion rules. Banks set up Visa and MasterCard, this helped them get around the collusion laws, but merchants haven’t been allowed too.

  11. Package Man says:

    I already pass on the fees in the form of higher prices.

    • YouDidWhatNow? says:

      Yup. Most retailers who know what they’re doing work that fee into their prices. The problem being that it doesn’t work on small purchases, because there’s always like a 35 cent transaction fee or something…so if you bought a pack of gum for 50 cents, the retailer already loses 35 cents to the credit card company.

      Some places post signs that say you get a 5% discount for paying cash…which was always kosher according to the merchant agreements. Fleet/Farm and Farm & Fleet being what comes to mind. They, like most retailers, jacked their price tags up to accomodate the CC fees, but are swell enough to essentially waive those fees if you paid in cash.

      • SavageFTW says:

        I am looking in to the cash option from now on. I do probably 1-2 transactions a day using my debit/credit card. using cash would save me a lot of coin.

    • Galium says:

      The questions is, are you going to lower your prices now with the new change? Most business’s will not, and I am not saying that is your intent.

      • mcgyver210 says:

        My companies don’t charge a fee specifically for cards now & at this time have no plans to start charging one so NO we will not be lowering any prices because of this.

        I personally don’t believe consumers are ready to accept this type of charge since I know I personally avoid merchants with extra charges. I recently paid an honest upfront merchant more than a cheaper one with extra charges not disclosed up front which even with fees was still cheaper by $30.00. It was principle for me same as I am willing to pay more for American made products & companies that have NO Illegals/Criminals on their payroll.

  12. makoto says:

    This is lovely. Just another thing for them to collect interest on…. I’m a bit confused how it is even legal for them to collect interest on a fee like that which is forced upon a consumer unless they use cash. I am being discriminated against due to my form of payment and penalized further by having to pay interest on a penalty!

    • frank64 says:

      You only pay interest if you don’t pay your balance in full every month.

      • frank64 says:

        It isn’t a penalty, it is a cost added to your bill. You are not being penalized when you are charged for extra cheese on your pizza, you are just paying for its costs. Same here. Would you rather you got free extra cheese and everyone paid for it? Wouldn’t everyone then ask for extra cheese, thus taking away the option of saving money by not having extra cheese? Merchants may want to allow cash customers to save money by paying cash right now it is very difficult to do. This is just a way for them do it. I think it will just allow the merchants to negotiate a lower the cost of the cheese so they don’t have to charge extra for it. OK, my analogy breaks down a bit, but……..

    • Smiling says:

      It isn’t a penalty, it is simply you paying for a service you choose to use instead of it being collectively paid for by everyone who shops where you are shopping, including customers who never use cards. I am all for it. I have no problem using another method of payment.

  13. TasteyCat says:

    Feel free to charge me additional fees. I will feel free to shop elsewhere. The gas station I used to go to started doing this a couple years ago. That’s why it’s the gas station I used to go to.

    If you want to lower your prices because you are able to charge additional fees, we’ll talk. Of course, we all know that’s not going to happen.

  14. ForTheRecord says:

    I think in the end very little will change for the merchant or the consumer. Most merchants probably won’t put a surcharge on a credit card sale. I think you’ll see the surcharge be applied at places that normally never used to accept cards, such as the dentist, doctor, municipal utilities, and maybe small mom & pop type stores (which I think have already been skirting the rules and charging a surcharge). The credit card companies will find another fee or method to recoup what they lose from this settlement.

    I said it in an earlier post. There’s no such thing as a free lunch. If you’re getting a cash back reward on your purchase it’s coming from somewhere and it’s not the credit card company.

  15. Lucky225 says:

    While MasterCard/Visa may modify their rules, State laws in at least 10 States prohibit surcharges.

  16. soj4life says:

    We already pay for this with increases in the price of our products, this is just retailers getting a second bite at the apple.

  17. Smiling says:

    So these stores that charge will be lowering their prices, since they had their prices set to help cover these charges before they could charge a fee? Yeah right.

  18. CA says:

    What is garbage about this is that many merchants, in their quest to nail the credit issuers, said that consumers would benefit by lower prices. It is not happening. Now, merchants want more. If I see the sign that says credit will cost more, I will leave. No, I do not work for a credit issuer. I just think the merchants lied in order to get more for themselves. They are not taking the risk. The credit issuers are taking the risk.

  19. TerraSin says:

    So will a merchant be required to tell buyers when there is a fee attached? And when there is, will it be a fixed fee that they can not make whatever they want?

    “That’ll be 106.78 cash or $125,34 credit, please.”

  20. JJFIII says:

    I have some issues with this. Merchants have the choice to not accept credit cards. Accepting them gives them extra business. In fact, if you look at any study on this, people using credit cards and debit cards have higher transaction amounts. So now there will be no advantage for me to buy $200 worth of groceries and put it on my card that I pay off the end of each month. The retailers who charge for the service of using my card will now force me to pay as I go with cash. So now I will still buy the same $200, but you will see it over more cash transactions, which in turn will mean you need more employees. This would be especially hurtful on items that are non-essentials. A restaurant? Clothes etc

  21. I look at both sides of the story says:

    I read most of the comments and what I haven’t seen yet is that many cashiers are not able to calculate the change from say a 5 dollar bill on a $2.82 purchase.

    Most check-outs automatically do the calculations but I’ve been in a number of places where the cashier had to use a calculator which greatly slows down the checkout process.

    If merchants posted the fees and consumers don’t want to pay the fee and use cash, the consumer may think twice about how much they’re purchasing and buy less — which may be good for consumers to cut back on stuff they don’t really need or can’t afford but bad for merchants.

    Merchants don’t want any impediments in consumer purchasing.

    • frank64 says:

      “Merchants don’t want any impediments in consumer purchasing”

      And neither do the banks, that is why I figure that there will not be too many charging, it will come down to a little extra negotiating power for the merchants and that is a good thing for them, and us.

      There will be some exceptions, I have read of some merchants charging now, but we always have the power of walking.

  22. Kestris says:

    Well, looks like I’ll be making a stop at the bank to get cash out before going grovery shopping from now on.

    • I look at both sides of the story says:

      “Well, looks like I’ll be making a stop at the bank to get cash out before going grocery shopping from now on.”

      If you have to drive to the bank, how much gas and time will you expend to avoid a credit card fee?