Retailers are now able to start charging a “checkout fee” of up to four percent to consumers who pay with plastic, and, as a result, Maryland consumers could see a slight increase in prices.
Effective last month, retailers may charge the fee to pass on credit card processing costs to the consumer. While retailers pay an average two percent processing fee, big-box retailers are usually able to negotiate a lower rate, MyEasternShoreMD.com reports.
Credit card processing fees paid out by small businesses reduce their overall profit margin, which could explain why a number of small retailers now require a minimum purchase when a customer uses a credit card.
“While the U.S. District Court ruling of the checkout fee may strengthen the bottom line of local retailers, this plan could backfire when consumers begin to search for strategies to avoid what may be perceived as a two to four percent nuisance fee,” Angie Barnett, the president and CEO of the Better Business Bureau for Greater Maryland, said, according to MyEasternShoreMD.com.
Recent studies of consumer behavior revealed that consumers are more likely to spend twice as much when paying with a credit card versus paying with cash, thereby establishing credit cards as a profitable product for the banking industry. A fall in credit card use could force creditors to eliminate the fees.
“Avoid the fee by paying with a debit card,” the BBB said, MyEasternShoreMD.com reports. “Look for retailers who offer a discount for cash and check purchases. The fee is not mandatory. Small local retailers are most likely to take advantage of the checkout fees. National retailers are unable to do so since the ruling stipulates that the fee can only be imposed if all 50 states opt in. Look for public notices. The regulations stipulate stores must fully disclose that they are going to add the surcharge by posting a notice at the entrance of the store. However, you may not know how much the fee is until you reach the cash register.”
Online retailers are only required to disclose the surcharge on the payment information page. Different credit cards may also carry different surcharges, though American Express is not party to the ruling, so no fees can be added to AMEX transactions.
“Check your receipt,” the BBB said, according to MyEasternShoreMD.com. “In Maryland, the retailer cannot charge sales tax on the surcharge. Therefore, the fee is not tacked on until the total price and tax are figured. Disclosure of this fee is required by terms of the new ruling.”
The new fee is the result of a recent settlement between Visa, MasterCard, retailers and banks, in which Visa and MasterCard changed their policies to allow the surcharge in order to settle allegations by retailers that the card companies colluded with banks to fix interchange rates unreasonably high. The settlement will also temporarily reduce interchange rates paid by retailers.