Up next: Credit card checkout fees

This post comes from Beverly Harzog at partner blog Wise Bread.

Would you pay a fee to use your credit card? I don't even need a nanosecond to answer this. My response is: No freakin' way.

Here's why I'm asking the question. Last summer, there was an antitrust settlement between merchants and Visa, MasterCard and big banks about credit card interchange fees. These are the "swipe" fees merchants pay to the networks (like Visa) to process your payments when you use your card. 

The settlement called for merchants to receive $7.2 billion in cash and temporary reductions in interchange fees. This settlement also gave merchants the legal right to add a "checkout fee" when you use a credit card to pay for purchases. These fees could start popping up as soon as Sunday.

How to know if a checkout fee will be charged

Merchants can't sneak in the fee without telling you upfront. They have to disclose that you'll pay more for using a credit card. So if you're in a store, look for notification at the entrance or at the register. When buying an item online, look for the checkout fee to be disclosed on the homepage of the business.

Retailers are allowed to charge a fee that's the equivalent of what they pay for the interchange fee, which is between 1.5% and 4%. I was kind of surprised to find out that merchants can add a surcharge of up to 4%. You know, that's a lot.

Competition is your friend

OK, so the settlement gave merchants the right to ask customers to pay a surcharge if they use a credit card. So they have the right to do it, but does it make business sense for retailers to charge a checkout fee?

I say no, it doesn't. I'm pretty sure a minority will try it out and see how it goes. If you use your credit card to pay for a $200 purchase, you could pay up to $8 just for the privilege of using a credit card. And if you're using a rewards card, paying an extra fee lowers the value of the rewards.

At the end of the day, we're all smart enough to do the math and choose the retailer that gives us the best deal. So I think competition is one of the reasons we won't see widespread checkout fees, at least not right away.

Also, other than price, customer service is often the best way for competitors to differentiate themselves. Retailers that don't charge their customers a checkout fee will look more consumer-oriented.

If you think about it, the only retailer that can probably get away with it easily is a store that offers something so unique that there's limited competition. Maybe if that were the case, you wouldn't even care because, for whatever reason, you really needed that specific, unique product.

Will credit card rewards be an endangered species?

Rewards credit cards tend to have the highest interchange fees, so there's speculation that credit card issuers might devalue rewards programs to save money. I doubt this will happen because this doesn't make sense in terms of profits.

Banks make a lot of money from rewards cards. Sure, they give cash back or help you earn free airfare, and that costs the issuer some dough. But rewards cards also have higher interest rates and many consumers routinely carry a balance. If banks decrease rewards, cardholders will lose the incentive to use them. If that happens, banks will lose revenue.

Now, banks don't normally sit around and accept their financial fate. So we could see annual fees inch up or interest rates on rewards cards go up a tad. But I don't think any changes will happen right away.

Also, this isn't a done deal, so trying to predict what will happen with any accuracy isn't possible at this point. There's more legal wrangling ahead.

Reasons why this isn't over

The agreement between merchants and the different payment networks is inconsistent (I almost used "convoluted," which also seems accurate). Visa, MasterCard, Discover and American Express all have rules that merchants have to follow.

Even though merchants can now charge a checkout fee for Visa and MasterCard credit cards, there's a problem if they also take American Express cards. American Express' agreement does not allow merchants to add a checkout fee, and they aren't part of the settlement. The irony is that American Express cards have the highest interchange fees of all.

Another reason it's way too soon to predict the future is because the merchants themselves aren't happy with the settlement. Big-time retailers such as Target and Home Depot aren't on board with the settlement. There are many details to the agreement that go way beyond the interchange fees, and this is why the outcome could remain up in the air for a while.

Just say no to checkout fees

The credit card checkout fee is actually banned in these 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. If you're not in one of these states, keep an eye out for this fee when you buy something. And if you're faced with a checkout fee, simply vote with your wallet. Spend your money with a vendor that isn't charging this fee.

And keep in mind that, according to Consumer Action, checkout fees are only allowed for credit cards and charge cards. You cannot be asked to pay a checkout fee for using a debit card.

More on Wise Bread and MSN Money:

• 4 easy credit card resolutions that anyone can keep
• The secret credit card perk that saved me $300
• 12 habits of highly responsible credit card users
• Need help with a credit card spat?
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• 6 steps for closing a credit card