Late last week, the world’s two largest processors of credit and debit card payments reached an agreement with retail groups suing them over some of their practices, which may lead to surcharges for consumers paying with credit.
The settlement, which will see Visa, MasterCard and a few other major financial institution pay a combined $7.25 billion to a number of retail groups as a result of a class-action suit brought in 2005, was agreed to on Friday, but could have implications for shoppers, according to a report from Forbes. In particular, the negotiations allow retailers to charge consumers a fee for using their credit cards to make a purchase.
This comes on the heels of a settlement a few years ago that allowed merchants to charge customers paying with cash less money for their purchases, but the increase is a new twist, the report said. According to the settlement, this new kind of checkout fee must be equivalent to what the merchant pays in interchange fees for accepting a credit card purchase, and typically ranges between 1.5 and 3 percent.
While some experts have said that it’s unlikely that merchants will actually increase the fees associated with making a credit card purchase to shoppers, some on the side of the payment processors wondered aloud why they included the option in negotiations, the report said.
“We know that merchants care about their customers and anticipate that they will not impose checkout fees, particularly because the value merchants derive from card acceptance far exceeds their costs,” MasterCard’s general counsel Noah Hanft told reporters after the settlement, according to the site. “However, throughout the litigation and as a condition for resolution, the merchant plaintiffs sought a change to the current rule and we focused our efforts in settlement negotiations to ensure consumer safeguards were included.”
However, it is important to note that this fee can only be applied in the event of a purchase made with a credit card, the report said. It is still prohibited for debit card purchases, which typically cost retailers far less in interchange fees than credit transactions. Further, fees of this type are prohibited by law in 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.
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The current debit interchange fee rules allow payment processors to charge a maximum flat rate of 21 cents per purchase.
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