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California Businesses Charging Fee for Credit Card Use

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Companies will typically tack on a fee ranging from anywhere between 45 cents to $2 onto purchases made with credit cards, particularly if the transaction’s value is less than a predetermined amount, according to a report from Visalia, California, television station KMPH. This practice is illegal in the state.

However, the state does allow for similar fees on debit card transactions, and also allows businesses to grant discounts to those consumers who opt to make payments in cash, the report said. This practice is often used to help defray the costs of processing fees charged by credit networks for accepting a card transaction, which can cost even small businesses tens of thousands of dollars annually.

Recently, the Federal Reserve Board imposed a limit on the amount of money payment processing networks could charge for debit transactions. As a consequence, many financial institutions are now working to generate new revenues and cut costs, according to My Bank Tracker. Some have opted to eliminate programs such as free checking accounts, while others will cut their debit cards spending rewards programs. In all, the regulatory change is expected to cost banks billions of dollars.

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