Money

MasterCard and Visa Credit Card Users Face 4 Percent Surcharge

| by
article imagearticle image

MasterCard and Visa users might be surprised to find a surcharge of up to 4 percent on their bills, after it was made legal on Sunday for merchants to tack extra fees on those who pay with plastic. 

It is the result of a fallout from a class-action settlement reached last July, which marked the end of a years-long battle between merchants, banks and credit card companies. 

Visa, MasterCard, and several banks and credit card institutions had to pay a group of retailers $6.05 billion, on top of allowing them to charge an extra credit fee starting January 27. 

Retailers must pay a percentage of their profits to credit card companies when they accept credit card payments. The only ones who escape this are the retailers who accept "cash only." But larger stores usually opt to accept credit card purchases. Some compensate for the loss of profit by raising their prices or establishing an unofficial minimum for credit card purchases. 

The surcharge is only able to pay for the cost of processing a credit card transaction, a cost that usually equals about 1.5 to 3 percent of the purchase. Merchants are unable to charge more than 4 percent and won't be able to add extra surcharges to debit card transactions.

Many retailers, however, are reluctant to implement the surcharge and hope that the deal will instead spark a competition between credit card companies, eventually resulting in a reduction of transaction fees. 

Credit card companies rely heavily on the fees, however, as they account for the risk of nonpayment or fraud. 

Some states have made credit card surcharges illegal. The surcharges, therefore, won't affect purchases in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. 

Retailers who plan to implement the surcharge must warn customers of it by posting a sign at their storefront. They also have to warn them at the checkout counter and on the receipt. 

Because many retailers have already factored interchange fees into their pricing, Edgar Dworsky, founder of ConsumerWorld.org, is fearful that some will "double dip" and charge twice. 

"It's predictable what's going to happen," he said. "We're at the top of the hill and we're going to start going down that slippery slope."

Some major retailers have already said they will not participate in the surcharge fee. Wal-Mart, Target, Sears, Home Depot, and Rite Aid already stated that they are not taking advantage of it. 

Many merchants are waiting to see what happens in court, as the National Retail Federation is planning to challenge the verdict.

(NYDailyNews)

Grocery Store in Legal Trouble for Selling Milk at Lower Price