Home > Uncategorized > U.S. Online Vendors Now Free To Add Credit Card Surcharges

U.S. Online Vendors Now Free To Add Credit Card Surcharges

As of Sunday, January 27th, new rules kick in allowing U.S. merchants to add service charges of up to 4% to credit card purchases made instore or online. Consumer World reports:

…Historically, merchants have been prohibited from imposing a surcharge when a customer uses a credit card because of a ban on the practice contained in contracts that banks and credit card companies have with sellers. That all changed last November when a federal judge preliminarily approved a settlement in an antitrust class action case brought by retailers against Visa, MasterCard, and a number of big banks. Part of the settlement, eliminating that ban on surcharges, goes into effect on January 27, 2013.

While widespread adoption of a credit card surcharge is not expected in the short-run, consumer advocates worry that over time they will become commonplace, and that surcharge abuses that developed in other countries will be replicated here.

“This outrageous, new fee should make every shopper think twice before plunking down a credit card,” said Edgar Dworsky, founder of ConsumerWorld.org. “If a national sales tax of 2, 3, or 4 percent were being proposed, everyone would be up in arms. Yet, nearly the equivalent of that – an up to 4 percent credit card surcharge pushed for by retailers – has flown under the radar with seemingly little scrutiny, criticism, or concern for consumers’ pocketbooks.

Under the new rules:

  • Sellers will only be allowed to surcharge customers for the actual costs of processing credit card transactions (typically 1.5 to 3 percent) or 4 percent, whichever is less.
  • Complicated rules allow retailers to choose the cards to which a surcharge will apply. However, American Express says while its agreements allow surcharges, a clever provision in them will likely mean that no surcharges can be applied to AMEX cards.
  • Debit cards and prepaid cards will not be subject to a surcharge.
  • Brick and mortar retailers will have to post a notice at the store’s entrance advising customers that a surcharge applies on purchases made with a credit card. However, only at the point of sale must there be a disclosure of the exact percentage. In addition, sales receipts will have to itemize the exact amount of the surcharge.
  • Online sellers only have to disclose that a surcharge will be imposed on the page of the website where credit cards are first mentioned. In a typical online transaction, however, selecting the form of payment is usually the final step before completing the transaction. Consumer advocates believe this late a disclosure will turn off shoppers who may feel they were hoodwinked into almost completing the buying process before being advised that a credit card surcharge applies.

…Continue reading at Consumer World

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