5 Things You Need to Know About the New Credit Card Checkout Fees

By Paul Riegler on 17 December 2012
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Starting in January 2013, if you are using a credit card to pay for somethingAn EMV-compatible credit card terminalin a store or restaurant and the total looks suspiciously higher than you thought it should be, you were probably charged a so-called checkout fee.

Because the fees are new and not being implemented universally, they are more of a concern to frequent travelers than to others, as this group is typically in more of a hurry and less likely to scrutinize a bill and also tends to patronize a variety of shops in different places, where different policies may be in place.

Created under a class-action settlement with Visa and MasterCard, checkout fees allow merchants to charge fees to cover the cost of processing the credit card transaction, which up until now was considered part of the cost of doing business.

The suit was filed against Visa, MasterCard, and large banks such as JPMorgan Chase and Bank of America in 2005, and retailers argued at the time that banks and credit card networks had conspired to set fees at arbitrarily high levels and to prohibit the practice of surcharging.   Part of the resolution was the establishment of a regulated checkout fee or surcharge.

The surcharges will appear on receipts in only 40 out of the 50 states. Ten states, namely California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas, prohibit credit card surcharges and merchants in those states will not be able to impose them.

While the concept of checkout fees is not very well known, some consumer groups are already speaking out against them.  San Francisco-based Consumer Action, an advocacy group, is warning consumers about the fees, outlining the requirements under which merchants can charge the fees, and offering options on how to avoid them.

Consumers are not the only ones against surcharges.  Visa, on its website, calls check-out fees an “unfair surprise” and says that its rules still prohibit them, despite the settlement, and Target, a major retailer, came out against the surcharges this past summer.

Here are the five key things business travelers need to know about checkout fees:

1.)  New credit card rules start in January 2013, at which time checkout fees will be allowed.

2.)  Surcharges are not permitted at all in the ten states where they are prohibited.

3.)  Merchants can only charge checkout fees on credit card transactions.  Charging a checkout fee on a debit card transaction is expressly prohibited.

4.)   Merchants who levy the fee must post a fee disclosure notice at the entrance to the establishment, point of sale, and on the receipt.

5.)  A merchant cannot levy a surcharge that is higher than the amount he pays the credit card company for the transaction, typically between 1.5 to 3% of the amount charged.

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