Will credit card users now have to pay swipe fees?
The massive Visa-MasterCard settlement ends a long-running battle with merchants, but also opens the door for retailers to charge customers extra.
Visa (V), MasterCard (MA), and several banks have agreed to pay $7.25 billion to settle antitrust charges that were brought by 7 million merchants -- a diverse group ranging from the nation's largest chains to mom-and-pop shops.
If the deal is approved by a federal judge, it would end a long-running dispute over the "swipe fee" -- 2% to 5% of the bill -- that Visa and MasterCard charge merchants every time a customer uses plastic. Under the terms of the settlement, Visa, MasterCard, and the banks would pay out $6 billion in penalties and reduce the swipe fee. In addition, merchants would be allowed to levy a surcharge on customers who use credit cards, which would let them recoup the cost of the reduced swipe fee.
Are retailers likely to do so?
Yep. Customers should expect to start paying more: Many retailers will likely impose a new "checkout fee" for consumers paying with credit cards, says Susanna Kim at ABC News. While big chains like Wal-Mart (WMT) and Target (TGT) may decide that they can afford to eat the costs of the swipe fee in order to retain customer loyalty, struggling mom-and-pop shops around the country are more likely to take advantage of this windfall.
In some cases, customers won't even have a choice: The checkout fee is a "tricky question for many retailers because they risk angering customers who prefer credit cards for purchases," says Robin Sidel at The Wall Street Journal. But "hotels and airlines are among the industries that may be the most likely to impose surcharges because their customers don't typically pay any other way." In those cases, the surcharge will probably be incorporated seamlessly into all their products and offerings.
No. Retailers would be dumb to charge more for plastic: Merchants have benefited enormously from the spread of credit cards, and most of them would be insane to put that revenue stream at risk, says Daniel Fisher at Forbes. Many sales would simply not occur if customers had only a credit card in their wallet and were expected to pay more than those who happened to have cash. Furthermore, introducing a checkout fee would make the shopping experience too similar to buying an airplane ticket, evoking the multiple surcharges and hidden fees that have made the industry synonymous with awful customer service.
More from The Week
- Wells Fargo's disgraceful discrimination scandal
- GM's 'love it or return it' offer: Desperate move?
- NBC's takeover of MSNBC.com: 3 consequences
will not do any business with any merchant that charges more for using plastic!
I use my credit card for almost every purchase I can because it is convenient and safer than carrying around wads of cash. I always pay off my balance every month as I set up direct payment from my bank. I will most likely NOT do business with merchants who charge extra for credit card purchases. If I find out I get charged after my purchase then both my time and the merchant's time will be wasted as well as the line of customers behind me because I will have to cancel the transaction. I am sure online sales will also drop rapidly if merchants charge credit card swipe fees to customers. Businesses will really end up suffering losses if they start charging customers and this makes no sense especially in a struggling economy. Are we trying to destroy our economy? Perhaps I am in the minority of those who are more responsible with my finances and using credit cards? Perhaps the government thinks there are too many irresponsible credit card users who get themselves into financial problems that it is necessary to dissuade credit card use and go back to the old ways of using cash? The problem is, I doubt those people will be any better with their finances even with cash. People need to learn to live within their budget! Why are you buying expensive designer clothes when you barely can afford your rent or mortgage payment?!?
So what happens now with using pay pal, and other forms of on line sales transactions? Will e-bay add swipe fees...this has the potential of making easy and fast on-line shopping a thing of the past, for the little man who has to save every single penny just to keep his head above water.
6 months ago I went all plastic & cash after using last check
now I ordered a new box of checks and ready to slow the lines down again.
Prepare for longer check-out times...if fees to use credit cards are imposed then I'll use the "old" personal check...
"Driver's license please and a second form of identity"
Customers/Hour through the checkouts will take a big hit... (But that won't cost the merchants anything).
This may be just the beginning,
More charges will follow, Then...
It will turn around and bite them in the a$$,
Just like it did BOA.
MORE ON MSN MONEY
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
The auto parts giant beats Wall Street expectations, while continuing to expand its stores in the U.S. and Mexico.
VIDEO ON MSN MONEY
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.