Uh oh! Merchant agreements to start allowing CC surcharges

Discussion in 'Blogstand' started by NYBanker, Jul 14, 2012.  |  Print Topic

  1. NYBanker
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    NYBanker Gold Member

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    Here is an article posted on WSJ.com.

    Most credit card merchant agreements in the US had provisions prohibiting hitting card customers with surcharges for using their card. While there have been exceptions (gas stations in some states, a few crafty merchants offering discounts for cash, etc), by and large, card customers pay the same price as cash customers, and the merchant ate the bank charges.

    According to this article, those customer surcharge prohibitions will start dropping away. This is bad news for all of us who use our cards for miles accumulation....those miles might soon be "not so free" any longer. :(

    In countries like Australia, a 1% surcharge is already fairly common for card users. I have a bad feeling we're heading that way too.

    Card Giants to Pay $6 Billion
    Visa, MasterCard Agree to Settlement That Allows Retailer Surcharges for Paying With Plastic
    By ROBIN SIDEL and ANDREW R. JOHNSON
    Visa Inc., MasterCard Inc. and some large banks agreed to pay scores of retailers—from giant Publix Supermarkets Inc. to an interior-design store in Minnesota—more than $6 billion to settle a long-running lawsuit, in a pact that also permits merchants to charge more to customers who pay with credit cards.
    More
    The settlement is a victory for retailers, which will get more control over how people pay, and removes a legal threat for the major card companies.
    It could potentially raise prices for some goods and services for consumers who prefer using cards to cash and checks.
    The agreement, reached after months of negotiations, calls for Visa and MasterCard to cut for eight months the fees that merchants pay to accept credit cards.
    The merchants valued the fee relief at $1.2 billion in addition to the $6 billion settlement, according to Robins, Kaplan, Miller & Ciresi LLP, one of the law firms representing merchants. The cash portion is to settle merchants' claims of price-fixing.
    Visa and MasterCard have already set aside most of the funds to pay for the cost of a settlement.
    The settlement also includes a number of big card-issuing banks, such as J.P. Morgan Chase & Co., Bank of America Corp. and Wells Fargo & Co. They, too, will contribute to the settlement, though it wasn't immediately clear how much each would have to chip in.
    Visa and MasterCard have already set aside most of the funds to pay for the cost of a settlement. Visa and MasterCard entered a sharing agreement last year that makes Visa responsible for about 67% of any settlement and MasterCard for 33%.
    The banks will help fund MasterCard's portion, leaving MasterCard with a responsibility of 12% of the settlement.

    MORE ...
     
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  2. TravelBear

    TravelBear Gold Member

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    Gee, now I may HAVE to figure out the trick it stuff. :(
     
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  3. milchap
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    milchap Gold Member

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    :eek:
     
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  4. LizzyDragon84
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    LizzyDragon84 Gold Member

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  5. infamousdx

    infamousdx Silver Member

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    Bad news no matter how you slice it. Even though merchants can circumvent this rule by offering a "cash discount", which is effectively the same thing as a credit card surcharge, if there is no law stopping them from the surcharge, it's probably going to become common place.
     
  6. mht_flyer
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    mht_flyer Gold Member

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    We are becoming a cashless society, the future is electronic payments, not paper cash --- I don't know about everyone else but I seldom carry more than 40.00 in my wallet. I use AMEX Gold charge card for everything (of course except when buying airline tickets it goes on my UA card :) )


    Then again everyone can start just using debit cards...
     
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  7. mht_flyer
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    mht_flyer Gold Member

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    One thing for sure is this could be competitive advantage for merchants that decide not to charge.

    I bet huge merchants like Walmart/Target won't charge.


    However will airlines charge??? Very difficult at best to pay with cash (and at a ticket counter you pay a fee anyhow)... Sounds like carriers will get another nickel and dime fee.

    Very poor decision.
     
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  8. mht_flyer
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    mht_flyer Gold Member

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    From visa USA:
    Perhaps other states will pass laws prohibiting this as well...
     
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  9. adambadam
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    adambadam Silver Member

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    My best guess is that large companies will not see much of any change (i.e. the WalMarts/McDonalds). For one with certain states not allowing it, I don't see them treating customers differently across state lines. Furthermore, I feel that larger companies prefer the use of CC to more antiquated methods as in many cases it has been A) proven to increase customers spend and B) it really helps cut down on certain types of fraud that are harder/slower to detect (obviously there is still CC fraud) and the costs of counting/handling/documenting all the additional cash.

    I also would not be surprised if you see more large companies go the Costco route where they accept only a single brand of electronic payment and just ink one really good deal with Visa/MC/Amex.

    Where you will see a surcharge more is at mom and pop stores, where they know what money is going in an going out and the CC fee really is just a cut out of their profit margin.
     
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  10. Scottrick
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    Scottrick Gold Member

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    I recall reading in an earlier WSJ article that cash discounts were already permitted by some of the financial reform legislation. In my mind, this is much more palatable to consumers than a surcharge, but in practice few businesses actually implemented it. I expect similar results once a surcharge is allowed.

    Most big retailers can absorb the processing fee and distribute it evenly across thousands of products and millions of customers to avoid the stigma of appearing to impose a surcharge. They already do this, giving cash customers a slight premium and credit customers a slight discount. Plus, it's faster, and speed matters. I know lots of places that are CC only, and others are even doing away with signatures and receipts to save time.

    Small retailers have fewer products and customers and compete with the big retail behemoths. It would be a huge PR disaster (on the scale of an individual business) if they started charging more when the Target or Safeway one mile away doesn't bother.
     
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  11. arkleseizure
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    arkleseizure Silver Member

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    I'm pretty sure the merchant agreements have always allowed cash discounts, which means this is just a matter of semantics. There is no actual difference between charging one group more or charging one group less; the impact is that different groups of customers end up paying different prices.

    That having been said, there is a pretty large perception difference between offering a discount to one group vs. increasing the price or adding fees to another group. Its hard to imagine clever business owners would want to term something as a punishment (for using a CC) when they could just as easily phrase it as a reward (for using cash).

    I don't run a business, let alone a small one, but it irks me to no end when business owners complain of CC fees while ignoring the issues of handling cash although. Don't tell me that money walks itself to the bank (without any shrink!) and deposits itself. And I'm pretty sure that, once or twice at least, I've seen videos on the news of people breaking into businesses and stealing cash...though maybe that was yogurt, I can't remember.

    Someone else has mentioned speed...don't get me started on being in the express line and watching someone fumble around for exact change. Or even worse...their checkbook :eek:.

    Sadly the point remains...we're probably heading towards the point where the "free" miles and points we've been getting from CC purchases start costing more and more. Hopefully we don't reach the breakeven point any time soon.
     
  12. MX

    MX Gold Member

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    A good half of gas stations in my area have recently switched to credit card surcharges. Worse yet, there's no way to tell if they did until you swipe your card (and see a jump in the posted prices). Some neighborhoods known for cheap gas have days (like today) when those stations do not accept cards at all. Again, there's no way to tell until you swipe your card and get an error message. An attendant told me today they won't run a credit charge manually either - only cash is accepted. It's complete chaos.
     
  13. Max M

    Max M Gold Member

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    I see this as the Renaissance of store-branded credit cards. Target already offers a 5% store discount for using their Target-branded credit and debit cards.

    I bet we'll see other large corporations start to implement their own branded credit card from companies that currently don't have them [i.e. drug store chains, some restaurant chains with multipule brands]. These companies will prbably offer a discount and/or rewards program for using store-branded credit and debit cards.
     
  14. Mapsmith
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    Mapsmith Gold Member

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    I suppose that this being a Visa/MC agreement, that maybe AMEX will sweeten the pot a little to get people to use their cards more. Both for the Consumer and the Merchant.

    (At the beginning of the year we got notification from AMEX that all returns would not result in refunds to the merchant of the Fees on the original purchase)

    Maybe we will see Merchant Fees drop for AMEX and maybe for the Consumer, more miles per $?????
     
  15. Explore
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    Explore Silver Member

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    Try 2% on up. In the UK, sometimes it's a fixed charge (e.g. 4 pounds!) no matter how small the transaction.
     
  16. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    If reward card usage drops due to surcharges eating away the earnings, will credit card issuers be forced to offer more generous reward rates?
     
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  17. NYBanker
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    NYBanker Gold Member

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    What state is this?

    In CT, cash vs credit prices are required to be clearly posted.
     
  18. gleff
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    gleff Co-founder

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    Amex agreements generally already allow for surcharges but only when all cards that are accepted add those same fees.

    So Visa/Mastercard allowing fees opens the door for fees on Amex as well.
     
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  19. Counsellor
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    Counsellor Gold Member

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    Well, if merchants begin adding a fee for use of the credit card, and that fee is in excess of the value of the miles/points earned on the transaction, it will cause me either to change to merchants who don't add the fee, or to begin using cash again. (I don't believe in using debit cards since the protections on those cards are very weak compared to credit cards.)

    In some cases, though, cash is just not practical -- e.g., plane tickets and on-line purchases where PayPal is not accepted. Guess I'll just have to eat the fee in such cases. :(
     
  20. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    But remember that credit cards offer perhaps other advantages (extended warranties, not having to go to the ATM every few days, ...).
     
  21. KyRoamer
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    KyRoamer Gold Member

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    That and maybe lower fees!!!
     
  22. MX

    MX Gold Member

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    FL here
     
  23. davef139

    davef139 Gold Member

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    The recent settlement shouldn't effect much in your day to day purchases. Where you will end up seeing it is at small businesses. Where they can now charge extra without retaliatory pressure from V/MC as it was against theirs terms of acceptance.
     
  24. HaveMilesWillTravel
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    HaveMilesWillTravel Gold Member

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    Yup, I think it's going to be the little stores that today may have minimum amounts for CC purchases posted. Others may follow, though. I don't expect the likes of Starbucks or most restaurants to follow, but I could see the airlines add a fee.
     
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  25. KyRoamer
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    KyRoamer Gold Member

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    Today a small mom and pop restaurant posted a requirement of a minimum credit/debit card charge of $10 and will no longer take American Express.
     

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