USA Merchants Reach Credit Card Surcharge Rights Agreement [Effective 1.27.2013]
Jul 14, 2012, 12:03 am
#61
Join Date: Nov 2010
Posts: 579
This is terrible news. While I have found establishments that have illegally charged extra for credit card use, I have been happy about the way that Chase has kindly refunded the extra fee to me upon calling them (I have learned to save the receipt in these cases).
I have been happy to find survey results indicating that in New Zealand, consumers have stated that they are reluctant to use retailers who impose extra surcharges for credit card use. I am hoping that there will be consumer pushback in the US. I am also hoping that some big retailers will avoid charging fees. For example, if Wal-Mart does not charge the fee, I doubt that the grocery stores and other stores competing directly with it in the same market will be able to charge the extra fees.
Regarding the reward bonuses--I am concerned about this being affected. In this way, I am hoping that the consumers do not get the card issuers to lower their swipe fees. However, I am wondering about whether supply and demand may still keep some bonuses high. If fewer consumers become willing to pay the annual fees for airline credit cards, will it mean that the cards will need to provide meaningful bonuses in order to continue to attract customers?
I am really concerned, especially after noticing that the airline bonuses for most other countries do not seem to be as high as in the US.
The one other thing that gives me a little bit of hope is the fact that three of the nation's most populated states, California, New York, and Texas, are among the states that will still prohibit credit card surcharges. Because of the large populations in these states, I am hoping that credit card companies and retailers will come up with nation-wide models that will follow the rules of these states.
I have been happy to find survey results indicating that in New Zealand, consumers have stated that they are reluctant to use retailers who impose extra surcharges for credit card use. I am hoping that there will be consumer pushback in the US. I am also hoping that some big retailers will avoid charging fees. For example, if Wal-Mart does not charge the fee, I doubt that the grocery stores and other stores competing directly with it in the same market will be able to charge the extra fees.
Regarding the reward bonuses--I am concerned about this being affected. In this way, I am hoping that the consumers do not get the card issuers to lower their swipe fees. However, I am wondering about whether supply and demand may still keep some bonuses high. If fewer consumers become willing to pay the annual fees for airline credit cards, will it mean that the cards will need to provide meaningful bonuses in order to continue to attract customers?
I am really concerned, especially after noticing that the airline bonuses for most other countries do not seem to be as high as in the US.
The one other thing that gives me a little bit of hope is the fact that three of the nation's most populated states, California, New York, and Texas, are among the states that will still prohibit credit card surcharges. Because of the large populations in these states, I am hoping that credit card companies and retailers will come up with nation-wide models that will follow the rules of these states.
Jul 14, 2012, 1:11 am
#62
Join Date: Mar 2011
Programs: AA, UA, DL, AS, LH, BA, VS, HHonors, Hyatt, Club Carlson, IHG, Marriott
Posts: 833
Didn't merchants got their way in reducing interchange fees for Visa/MC debit cards. They were supposed to pass down the savings to consumers but I have yet to feel any difference. They'll probably just keep the surcharges to help their bottom lines like airlines do with their baggage fees.
Jul 14, 2012, 3:22 am
#63
Moderator: Manufactured Spending
Join Date: Jul 2011
Posts: 6,577
It is important to note that this settlement only affects actual credit cards, not debit cards run in "credit" mode. I remember reading somewhere that debit card usage has now surpassed credit card usage in the US. Since I would assume most people have at least one debit card in their wallet with a Visa or MC logo, this surcharge may not have much of an impact for most people.
My guess is that some stores will start surcharging credit cards, and you will be able to either use your debit card to avoid the surcharge or use your credit card and get your miles/points. You will need to do the math and figure out if the rewards offset the surcharge for each individual situation.
My guess is that some stores will start surcharging credit cards, and you will be able to either use your debit card to avoid the surcharge or use your credit card and get your miles/points. You will need to do the math and figure out if the rewards offset the surcharge for each individual situation.
Jul 14, 2012, 3:25 am
#64
Moderator: Manufactured Spending
Join Date: Jul 2011
Posts: 6,577
Jul 14, 2012, 4:51 am
#65
In memoriam
Join Date: Jan 2006
Posts: 4,020
Didn't merchants got their way in reducing interchange fees for Visa/MC debit cards. They were supposed to pass down the savings to consumers but I have yet to feel any difference. They'll probably just keep the surcharges to help their bottom lines like airlines do with their baggage fees.
Of course, merchants don't put up signs saying: "This toothpaste reduced 14 cents due to debt card class action."
That doesn't mean it didn't happen.
Jul 14, 2012, 5:38 am
#66
Join Date: Dec 2006
Location: BTR, MSY
Programs: DL, BA, AA, UA, HHonors, PC
Posts: 200
IMHO, this claim that there will be no savings to consumers is dubious. IF you believe there is market competition in US retail then a reduction of costs for all or most merchants must be reflected in pricing.
Of course, merchants don't put up signs saying: "This toothpaste reduced 14 cents due to debt card class action."
That doesn't mean it didn't happen.
Of course, merchants don't put up signs saying: "This toothpaste reduced 14 cents due to debt card class action."
That doesn't mean it didn't happen.
Pricing rarely ever gets reduced. It will now be store profit instead of V/MC profit and will be eating into my rewards strategy.
Jul 14, 2012, 6:32 am
#67
Join Date: Jul 2007
Posts: 1,762
Then came a lawsuit and it was ruled that the state where the credit card company has its headquarters, governs things such as this. Citibank moved its credit card operations to South Dakota (Chase to Delaware as I remember) and voila, they could then charge annual fees. NY eventually rescinded the law.
I suspect that when push comes to shove, if airlines really want to charge a surchargbe, they will get some kind of court decision that the location of their credit card processor determines whether they can charge a surcharge (don't we have the same thing already with foreign transaction fees where many of the foreign airlines process their mc/visa charges out of country and the banks tack on the 3% fee?)......always states with progressive governments that actually protect consumers are overriden by the feds.
Jul 14, 2012, 7:25 am
#68
Join Date: May 2009
Location: South Park, CO
Programs: Tegridy Elite
Posts: 5,678
The other thing noted in the settlement is that merchants are allowed to collectively negotiate over swipe fees. No idea whether, or how much, that will or won't happen. But if we're lucky perhaps that angle will be pursued first, or more often, than simply tacking on a surcharge - maybe more so by the larger retailers than mom & pops. I could see the same group of companies that joined this suit, also joining to negotiate down the swipe fees, though of course that doesn't mean it will happen.
Perhaps a dumb question as I haven't followed all the prior debit card fee issues, but is there anything to prevent a merchant from also tacking on a (smaller) "debit card surcharge"? Yes it's significantly lower than credit card swipe fees but still, it all adds up.
I think it's crazy to believe any "savings" in unit prices will be passed on to consumers if surcharges go into effect. Prices of items will remain the same (aside from changes in other cost elements) and surcharges would just be added in top. The best scenario for competition to help will be in whether or not a surcharge is routinely added on by the largest retailers.
And, there will probably only be one bite at the apple. Whoever is first (Target, Wal-Mart, etc) in implementing it will either soon backpedal due to backlash, as no one else follows suit. Or the other retailers will join them in adding surcharges and then it will become permanent.
In large metro areas there is lots of retailer competition but that doesn't hold true everywhere. In my smaller hometown there is a Super Wal-Mart and no other national chain aside from a run down Rite Aid. It's a 30 mile drive to the nearest town with more selection. The local Wal-Mart has a lot of leverage in prices, especially for the non-big ticket stuff where folks are less likely to drive an hour round-trip to purchase elsewhere.
Perhaps a dumb question as I haven't followed all the prior debit card fee issues, but is there anything to prevent a merchant from also tacking on a (smaller) "debit card surcharge"? Yes it's significantly lower than credit card swipe fees but still, it all adds up.
I think it's crazy to believe any "savings" in unit prices will be passed on to consumers if surcharges go into effect. Prices of items will remain the same (aside from changes in other cost elements) and surcharges would just be added in top. The best scenario for competition to help will be in whether or not a surcharge is routinely added on by the largest retailers.
And, there will probably only be one bite at the apple. Whoever is first (Target, Wal-Mart, etc) in implementing it will either soon backpedal due to backlash, as no one else follows suit. Or the other retailers will join them in adding surcharges and then it will become permanent.
In large metro areas there is lots of retailer competition but that doesn't hold true everywhere. In my smaller hometown there is a Super Wal-Mart and no other national chain aside from a run down Rite Aid. It's a 30 mile drive to the nearest town with more selection. The local Wal-Mart has a lot of leverage in prices, especially for the non-big ticket stuff where folks are less likely to drive an hour round-trip to purchase elsewhere.
Jul 14, 2012, 7:48 am
#69
Join Date: Jul 2007
Posts: 1,762
The other thing noted in the settlement is that merchants are allowed to collectively negotiate over swipe fees. No idea whether, or how much, that will or won't happen. But if we're lucky perhaps that angle will be pursued first, or more often, than simply tacking on a surcharge - maybe more so by the larger retailers than mom & pops. I could see the same group of companies that joined this suit, also joining to negotiate down the swipe fees, though of course that doesn't mean it will happen.
Perhaps a dumb question as I haven't followed all the prior debit card fee issues, but is there anything to prevent a merchant from also tacking on a (smaller) "debit card surcharge"? Yes it's significantly lower than credit card swipe fees but still, it all adds up.
I think it's crazy to believe any "savings" in unit prices will be passed on to consumers if surcharges go into effect. Prices of items will remain the same (aside from changes in other cost elements) and surcharges would just be added in top. The best scenario for competition to help will be in whether or not a surcharge is routinely added on by the largest retailers.
And, there will probably only be one bite at the apple. Whoever is first (Target, Wal-Mart, etc) in implementing it will either soon backpedal due to backlash, as no one else follows suit. Or the other retailers will join them in adding surcharges and then it will become permanent.
In large metro areas there is lots of retailer competition but that doesn't hold true everywhere. In my smaller hometown there is a Super Wal-Mart and no other national chain aside from a run down Rite Aid. It's a 30 mile drive to the nearest town with more selection. The local Wal-Mart has a lot of leverage in prices, especially for the non-big ticket stuff where folks are less likely to drive an hour round-trip to purchase elsewhere.
Perhaps a dumb question as I haven't followed all the prior debit card fee issues, but is there anything to prevent a merchant from also tacking on a (smaller) "debit card surcharge"? Yes it's significantly lower than credit card swipe fees but still, it all adds up.
I think it's crazy to believe any "savings" in unit prices will be passed on to consumers if surcharges go into effect. Prices of items will remain the same (aside from changes in other cost elements) and surcharges would just be added in top. The best scenario for competition to help will be in whether or not a surcharge is routinely added on by the largest retailers.
And, there will probably only be one bite at the apple. Whoever is first (Target, Wal-Mart, etc) in implementing it will either soon backpedal due to backlash, as no one else follows suit. Or the other retailers will join them in adding surcharges and then it will become permanent.
In large metro areas there is lots of retailer competition but that doesn't hold true everywhere. In my smaller hometown there is a Super Wal-Mart and no other national chain aside from a run down Rite Aid. It's a 30 mile drive to the nearest town with more selection. The local Wal-Mart has a lot of leverage in prices, especially for the non-big ticket stuff where folks are less likely to drive an hour round-trip to purchase elsewhere.
Jul 14, 2012, 11:15 am
#70
Join Date: Nov 2010
Posts: 579
Here is a link to the release about the survey showing that consumers in New Zealand are not happy about credit card fees and that they vow to shop else where if merchants impose those fees:
http://www.impactpr.co.nz/News/Clien...-Research.aspx
New Zealand is an interesting country to watch since it did not allow merchants to impose extra fees until 2010. It appears that most merchants that charge fees did not begin doing so until about a year and a half after the law was passed. Apparently, most of the larger businesses do not charge fees, but they are common for taxi cabs, hotels, and airlines. I am hoping that it may be different for airlines and hotels here. Since most airlines and hotels are linked with the major banks (for example, American has a card with Citibank, Southwest, United, and Hyatt are with Chase), I am hoping that they will not want to hurt the relations with their partner banks by adding fees for credit card use.
I noticed that it appears that many of you are hoping that the merchants will negotiate with the credit card companies for lower rates (instead of charging fees to consumers). I am concerned that this outcome may be the worst for many flyertalk members as it will likely cause banks to lower the amounts of bonus miles that one can earn through getting/using a reward card.
Also, looking at which businesses charge a fee will have a major impact on my loyalty to small businesses. In many cases, I try to patronize small businesses. However, if the small business charges a credit card fee, I will take my business to a larger retailer who does not charge a fee. If the brick and mortar stores charge a fee, I will not feel bad using Internet businesses that are located out of state that do not charge the fee.
This may also limit the amount of souvenirs that I purchase when traveling. I generally purchase souvenirs (generally for co-workers, etc) at small souvenir stores. If any of these stores tries to impose a credit card fee, I will plan to either purchase souvenirs elsewhere or not purchase a souvenir at all.
http://www.impactpr.co.nz/News/Clien...-Research.aspx
New Zealand is an interesting country to watch since it did not allow merchants to impose extra fees until 2010. It appears that most merchants that charge fees did not begin doing so until about a year and a half after the law was passed. Apparently, most of the larger businesses do not charge fees, but they are common for taxi cabs, hotels, and airlines. I am hoping that it may be different for airlines and hotels here. Since most airlines and hotels are linked with the major banks (for example, American has a card with Citibank, Southwest, United, and Hyatt are with Chase), I am hoping that they will not want to hurt the relations with their partner banks by adding fees for credit card use.
I noticed that it appears that many of you are hoping that the merchants will negotiate with the credit card companies for lower rates (instead of charging fees to consumers). I am concerned that this outcome may be the worst for many flyertalk members as it will likely cause banks to lower the amounts of bonus miles that one can earn through getting/using a reward card.
Also, looking at which businesses charge a fee will have a major impact on my loyalty to small businesses. In many cases, I try to patronize small businesses. However, if the small business charges a credit card fee, I will take my business to a larger retailer who does not charge a fee. If the brick and mortar stores charge a fee, I will not feel bad using Internet businesses that are located out of state that do not charge the fee.
This may also limit the amount of souvenirs that I purchase when traveling. I generally purchase souvenirs (generally for co-workers, etc) at small souvenir stores. If any of these stores tries to impose a credit card fee, I will plan to either purchase souvenirs elsewhere or not purchase a souvenir at all.
Jul 14, 2012, 11:35 am
#71
Join Date: Nov 2010
Posts: 579
JEFFJAGUAR's comment got me curious about collusion as well. If the stores do not discuss what they are doing with each other but merely copy the practices of others in the industry, there is no collusion. In this type of situation, they would similar to the airlines where airlines copy each other for fare increases, fuel surcharges, baggage fees, etc. Sometimes, other airlines do not match an airline's fees (such as what happened with domestic fuel surcharges in the US a few years ago), and sometimes, they do match the other airline's fees.
There is collusion if they actively discuss with each other the fees that they are going to charge consumers. If they actively discuss this as part of the credit card settlement, it is likely that consumers could sue them for collusion. However, if Visa and Mastercard uniformly set the new maximum rates but the merchants do not discuss what they are doing with each other, there is no collusion.
The collective bargaining process here looks interesting. If the two collectively bargain in any way that adds a fee to consumers, I could see this constituting collusion. If they just bargain for the interchange rates and do not discuss the consumer fees, I could see a consumer have a difficult time getting standing to sue for collusion. On the other hand, if one can show that this bargaining affects their rewards, perhaps credit card customers could claim collusion for this but this may be a stretch.
I also find the cases of Discover and American Express to be interesting. My guess is that one of the reasons that they have allowed merchants to charge fees is because there are few places (Costco is an exception)that accept their cards that do not also accept Mastercard and/or Visa. Does anyone have more information about what Discover and American Express's agreement says? My guess is that the Visa and Mastercard settlement will likely only allow extra fees if they are charged for all credit card purchases
There is collusion if they actively discuss with each other the fees that they are going to charge consumers. If they actively discuss this as part of the credit card settlement, it is likely that consumers could sue them for collusion. However, if Visa and Mastercard uniformly set the new maximum rates but the merchants do not discuss what they are doing with each other, there is no collusion.
The collective bargaining process here looks interesting. If the two collectively bargain in any way that adds a fee to consumers, I could see this constituting collusion. If they just bargain for the interchange rates and do not discuss the consumer fees, I could see a consumer have a difficult time getting standing to sue for collusion. On the other hand, if one can show that this bargaining affects their rewards, perhaps credit card customers could claim collusion for this but this may be a stretch.
I also find the cases of Discover and American Express to be interesting. My guess is that one of the reasons that they have allowed merchants to charge fees is because there are few places (Costco is an exception)that accept their cards that do not also accept Mastercard and/or Visa. Does anyone have more information about what Discover and American Express's agreement says? My guess is that the Visa and Mastercard settlement will likely only allow extra fees if they are charged for all credit card purchases
Jul 14, 2012, 12:08 pm
#72
Join Date: Aug 2011
Location: ELP
Programs: AAdvantage, Amex MR
Posts: 2,314
Yeah that would be the only real thing that I couldn't live with is if airlines and hotels started collectively charging a credit card booking fee. It will definitely lead me to cancelling any and all cards with an annual fee like the Sapphire Preferred. After all if I have to pay to earn UR points or travel benefits, it is not worth it to me.
Simple with retailers, restaurants, and other brick and morter places. I just go to whoever doesn't charge a fee. It is more difficult if all airlines and hotels are charging.
Just tried a dummy booking on choice hotels with a Comfort Inn. There are only two options to pay. Debit or Credit card. It says a hold will be placed for booking with a debit card.
Now I have never booked a hotel with a debit card so how do these work? If the total stay is 230 dollars all in for 2 nights, will the hotel just charge 230 dollars to my account, and place a freeze on the next 100 or 200 or whatever dollars of payment? How long does this hold last particularly for an advance purchase rate where you pay at booking? Are your funds held for however long until your stay?
Would be quite harsh to force the customer to choose between a hold on their account and risk of overdrafts, or a credit card surcharge.
Simple with retailers, restaurants, and other brick and morter places. I just go to whoever doesn't charge a fee. It is more difficult if all airlines and hotels are charging.
Just tried a dummy booking on choice hotels with a Comfort Inn. There are only two options to pay. Debit or Credit card. It says a hold will be placed for booking with a debit card.
Now I have never booked a hotel with a debit card so how do these work? If the total stay is 230 dollars all in for 2 nights, will the hotel just charge 230 dollars to my account, and place a freeze on the next 100 or 200 or whatever dollars of payment? How long does this hold last particularly for an advance purchase rate where you pay at booking? Are your funds held for however long until your stay?
Would be quite harsh to force the customer to choose between a hold on their account and risk of overdrafts, or a credit card surcharge.
Jul 14, 2012, 12:33 pm
#73
Join Date: Mar 2011
Programs: AA LT PLT 3.2MM, Hilton Diamond, SPG Gold
Posts: 117
I think that this is terrible. I hate cash and checks - they have little place in a modern society. I will definitely favor merchants with no surcharges for credit card use. To the merchants out there, let me point out the indirect costs of cash & checks far exceed the more visible costs of credit card transaction fees.
For checks, there are the obvious and significant costs of bad checks. Also cashiers lose productivity while waiting for checks to be written. It probably takes twice as long for check writing customers. If all of the checkout lines have check writers slowing things down, I may just walk away.
Cash encourages crime. Many cash cashiers ring up only part of the items for their friends. Cash sometimes disappears between customers paying and the bank deposit. Cash merchants attract armed robbers. Just yesterday, I visited two direct competitors. One illegally discounted for cash - he had to pay for a full time armed guard. The other did not have to have a guard. Unfortunately, some day the armed guard will not suffice and someone will get hurt.
On the positive side credit cards attract more affluent customers who spend more.
For checks, there are the obvious and significant costs of bad checks. Also cashiers lose productivity while waiting for checks to be written. It probably takes twice as long for check writing customers. If all of the checkout lines have check writers slowing things down, I may just walk away.
Cash encourages crime. Many cash cashiers ring up only part of the items for their friends. Cash sometimes disappears between customers paying and the bank deposit. Cash merchants attract armed robbers. Just yesterday, I visited two direct competitors. One illegally discounted for cash - he had to pay for a full time armed guard. The other did not have to have a guard. Unfortunately, some day the armed guard will not suffice and someone will get hurt.
On the positive side credit cards attract more affluent customers who spend more.
Last edited by olddallas; Jul 14, 2012 at 12:37 pm Reason: typo
Jul 14, 2012, 2:27 pm
#74
Join Date: Jul 2012
Location: LAX
Posts: 298
Now I have never booked a hotel with a debit card so how do these work? If the total stay is 230 dollars all in for 2 nights, will the hotel just charge 230 dollars to my account, and place a freeze on the next 100 or 200 or whatever dollars of payment? How long does this hold last particularly for an advance purchase rate where you pay at booking? Are your funds held for however long until your stay?
I don't see large hotel groups (especially upscale ones) adding surcharges. People are going to balk at these kinds of things--me included.
Jul 14, 2012, 3:34 pm
#75
Moderator: Manufactured Spending
Join Date: Jul 2011
Posts: 6,577
Many years ago, NY State had a law prohibiting credit card companies from charging annual fees. Citibank tried to get around it by charging 50˘ a month for producing a statement but the Court of Appeals threw it out.
Then came a lawsuit and it was ruled that the state where the credit card company has its headquarters, governs things such as this. Citibank moved its credit card operations to South Dakota (Chase to Delaware as I remember) and voila, they could then charge annual fees. NY eventually rescinded the law.
I suspect that when push comes to shove, if airlines really want to charge a surchargbe, they will get some kind of court decision that the location of their credit card processor determines whether they can charge a surcharge (don't we have the same thing already with foreign transaction fees where many of the foreign airlines process their mc/visa charges out of country and the banks tack on the 3% fee?)......always states with progressive governments that actually protect consumers are overriden by the feds.
Then came a lawsuit and it was ruled that the state where the credit card company has its headquarters, governs things such as this. Citibank moved its credit card operations to South Dakota (Chase to Delaware as I remember) and voila, they could then charge annual fees. NY eventually rescinded the law.
I suspect that when push comes to shove, if airlines really want to charge a surchargbe, they will get some kind of court decision that the location of their credit card processor determines whether they can charge a surcharge (don't we have the same thing already with foreign transaction fees where many of the foreign airlines process their mc/visa charges out of country and the banks tack on the 3% fee?)......always states with progressive governments that actually protect consumers are overriden by the feds.
Perhaps merchants such as Amazon will be able to sell to residents of California and New York and still charge a surcharge, claiming that they are not subject to state law because they have no physical presence in the state, just as they do with taxes. However, physical retailers will not be able to get around this law.
