Small Business: Customer credit-card fees pose a dilemma
BY JOYCE M. ROSENBERG AP Business Writer
Sunday, February 03, 2013
2/03/13 at 4:15 AM
NEW YORK (AP) - Gretel-Ann Fischer already told customers that she won't accept credit cards for purchases under $5 at her Vermont bakery. The last thing she wants to do is alienate them by passing along the transaction fee she has to pay each time they use plastic.
Fischer is one of thousands of retailers in 40 states who now have the right to charge customers the fees that come along with using credit cards. They won that right as part of a settlement of a class action lawsuit brought by merchants against the credit card companies Visa and MasterCard and major banks that issue credit cards.
But many small retailers say that customers will bolt if they tack on a surcharge that could range from 1.5 percent to 4 percent of purchases made with plastic.
"It's just not going to happen. It's hard enough to get them to accept the $5 minimum," says Fischer, who owns Cupps Cafe and Bakery in Winooski, Vt.
The surcharges are the result of a settlement last July of a long-running federal antitrust lawsuit brought by nine retailers against Visa, MasterCard and major banks. Before the agreement, the credit card companies prohibited retailers and other businesses that accept credit cards from charging customers for the right to use plastic. The settlement gave merchants the right to pass along the fees as of Jan. 27.
The plaintiffs in the lawsuit ranged from Leon's Transmission, a California auto repair company with seven locations, to Payless ShoeSource, which has thousands of shoe stores across the country. They charged that Visa, MasterCard and the banks conspired to fix the fees on credit card transactions. Other big merchants including grocer Kroger and drugstore chain Walgreen, had also filed suits.
The surcharges aren't something that a retailer can just slip in without telling customers. The agreement requires retailers to notify customers before and after a purchase. That means visible signs at a store entrance and its cash registers. And the sales receipt has to list the surcharge separately. Websites must also notify customers that they're about to pay more for something they buy online.
But the number of retailers who pass along the transaction fee is likely to be relatively small. Big retailers like Wal-Mart and Target have already said they won't do it. And under the agreement, a multistate retailer with stores in the 10 states where the surcharge is illegal can't impose it in states where it is.
Original Print Headline: Credit fees pose a dilemma
Businesses accepting credit cards must decide whether or not to pass along the credit-card fees to their customers. Associated Press file