Will retailers add a new
fee for paying with credit or debit?
ISAAC M. O'BANNON, EDITOR
- CPA PRACTICE ADVISOR
CREATED: JANUARY 31, 2013
A cup of coffee at your
local cafe might cost you 2-5 percent more if you pay by plastic instead of
cash. So could anything else you buy with a credit or debit card.
Tools from Lowes? A
computer from Best Buy? A book from Amazon? The rules apply to both in-store
purchases and those made online.
That's the result of a
recent court settlement that had many of the nation's retailers, from single
location burger joints to the largest national chains, pitted against the banks
that issue cards. At issue were the fees that the small businesses have to pay
the banks, and the banks' merchant agreements.
Until the settlement,
merchants were contractually prohibited from adding a surcharge to plastic
purchases, even though they had to pay a percentage-based fee themselves. There
are also often additional per-charge fees ranging up to 20 cents for each sale.
That sounds small, but can be significant on small purchases.
The merchants were also
not supposed to require minimum purchase amounts for customers using a credit
or debit card. Those rules were lawful in 40 states, but in ten, there were
regulations already in place that allowed it. Of course, many merchants across
the country had broken those rules for years, anyway.
The states where the
surcharge is already illegal are California, Colorado, Connecticut, Florida,
Kansas, Maine, Massachusetts, New Jersey, Oklahoma and Texas. Now that the
other states are allowed to add charges or set miminums, you may see changes,
but not everywhere.
Tim Wiegman, the owner of
Boulevard Limosine in Kansas City, told CPA Practice Advisor that he doesn't
plan on passing any charges along. He says it would be a competitive
disadvantage.
"My business planning
already includes the costs and fees involved in accepting credit or debit
cards, so they are built into pricing as a part of my overhead costs," he
said. "If a customer chooses to pay in cash, well, that's an additional
3-4 percent bonus for us."
He also noted that a large
part of his business comes from corporate accounts, which are paid either in
advance or by check through invoicing and contract agreements. Those agreements
wouldn't be affected by the new credit card surcharge rules.
Wiegman isn't the only
small business owner who thinks the change isn't a big deal.
In Vermont, Gretel-Ann
Fischer, the owner of Cupps Cafe and Bakery, told the Associated Press recently
that she won't pass along a surcharge because she knows that it could irritate
customers and hurt sales. But she is planning on setting a minimum charge of
$5.
"It's just not going
to happen," she said. "It's hard enough to get them to accept the $5
minimum." She said she is also charged 17 cents per transaction for credit
or debit card purchases, which combined with the percentage charge, can add 25
cents or more to the overhead on a cup of coffee.
With the settlement,
retailers will be required to post a notice if they will charge a percentage
fee or if, like Cupps Cafe, they set a minimum charge amount for plastic
purchases. Websites also have to follow these rules.
Most of the larger
retailers still won't pass along charges, though. Chains like Starbucks,
Target, Wal-Mart, Staples and Best Buy have already made statements saying they
will continue sales unchanged. According to the provisions of the settlement,
these retailers wouldn't have been able to anyway.
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