For those who pay with a credit card, your purchases just got more expensive.
A recent change to Visa and MasterCard regulations removes restrictions on vendors and businesses which allows them to charge consumers a surcharge fee when paying with credit cards. This fee has always been there, we just never noticed it because it was absorbed into the price of the item.
Credit cards will cost you more than cash
When paying with a credit card or using a debit card in the non-pin function (swipe-and-sign), a surcharge equal to the merchant’s processing fee can be added to the total. These fees can range from about 1.5 percent up to 5 percent, but merchants are capped at charging the consumer more than 4 percent.
Establishments must post a sign visible to consumers at the front entry door and at the checkout stand, or must be visible online when credit card payment options are presented.
You were charged more before the surcharge
Processing fees have been added to the price of goods and services for decades, we just have never seen them. The sale of a $100 item at a store that is charged a 3 percent processing fee will cost the merchant $3.00 when running the approval through the credit card system. Because these charges have never been itemized on our bills we never noticed them.
The merchant had to build this fee into the price of the item in order to make a profit – and to stay in business.
Cash is cheaper than credit cards
Even though we may have paid with cash or checks, we were paying the inflated cost of the item all along. However, retailers are now able to encourage the use of cash and checks (or debit with PIN) by offering a discount. Would you turn down an “immediate rebate” of $3.00 if you paid with something other than a credit card?
Can debit cards be charged a surcharge?
No. The recent change in regulations does not allow merchants to impose a surcharge for debit cards when they are used in the ATM/Debit function (with a 4-digit PIN). These transactions flow through a different processing system and are not governed by the same policies. This is one more reason why debit cards are better than credit cards.
Does this effect the Zero Liability Policy on debit cards?
It doesn’t. You have the same Zero Liability Protection when using a debit card like a credit card. If your number is ever used without your authorization then you are not responsible for the charges.
How to use a debit card responsibly
There are three reasons I use my debit card like a credit card:
- For the added protection from the Visa and MasterCard system
- When I don’t have control of my card (like a restaurant)
- To earn PerkStreet cash-back or rewards (Update: No longer available)
I do choose to use my debit card with the PIN number when shopping in local establishments that I care about. I loved the small business owners at my daughters Tae-Kwon-Do club. I chose “Debit” when paying the monthly fee – and probably saved them $2 a month. That is not a lot of money, but it adds up quick when you consider there were 20-30 other kids in the dojang.
This is more theory than practice
While I will re-think my choices when paying for things with my debit card, this won’t change the way most people pay for stuff. Why? I really don’t think retailers are going to start imposing a surcharge fee. It has always been a cost of doing business, like payroll and electricity, and built into the price for decades. To drastically change the way cashier process payments and to single-out credit card consumers would be bad marketing and could drive people to their competition.
I would like to see more merchants offer discounts to cash and debit card consumers. It would incentivize more people to pay with a medium of exchange that has limits, offers them a way to stay on-budget, and ultimately pay attention, not interest. It’s a win-win for everyone.
What about you? How will you pay for things differently at locations that charge a surcharge for charge cards (say that three times fast)? Please leave your thoughts in the comments below.