New Credit Card Surcharge OK for Some, Surprises Others
Tuesday, January 29, 2013
For years, card issuers have been making money off the fees they charge retailers for the convenience of using a credit card at checkout. Beginning Jan. 27, however, retailers are now permitted to pass this cost onto customers in a big way as a U.S. District Court has decided that merchants can add a surcharge of up to 4 percent onto a customer's bill if they pay with a credit card.
If that sounds like a lot, then you’re right. But, if you like to shop at major retailers, it's not likely the surcharge will affect your wallet considerably. However, if your preference is to shop at small, local or online shops, marketing expert Brent Smith, Ph.D., says you should be wary of surcharge surprises as some retailers may experiment with some level of surcharge fee — perhaps 1 or ½ percent – he cautions.
"Generally, larger retailers generate significant customer transactions, and can negotiate better rates compared to smaller, independent shops," says Smith, an associate professor of marketing at Saint Joseph's University in Philadelphia. "The research has confirmed that customers spend more money when using a credit card versus cash, so the cost-benefit analysis may encourage retailers to opt out of the surcharge."
The online community is a bit sensitive to this news. Recently implemented legislation requiring online sellers to collect state sales tax puts a spotlight on the surcharge. "Since most online purchases involve credit cards, hitting shoppers with added fees could make this community bitter or disenchanted," says Smith.
The strongest deterrent to increased fees, he says, is consumer awareness. Retailers are required to disclose if they're going to add a surcharge to your purchase, so customers may see signage, notification on a receipt or other indications.
Many of us have some experience with gas stations that charge higher prices for credit card purchases versus cash, notes Smith.
"If the surcharge fees get out of hand, customers will likely push back," he says. "People could protest through social media, as they did recently against Subway's $5 foot-long product. Savvy shoppers could also respond by crowd-sourcing tips to find surcharge-free retailers."
Smith, an associate professor of marketing, can be reached for comment at email@example.com, 610-660-3448 or by calling University Communications at 610-660-1355.