Surcharging is Here—Or Is It?

Jan. 28, 2013

Despite the fact that it has not received final approval, part of the interchange settlement between merchants and Visa, MasterCard and many of the top card-issuing banks went into effect yesterday. Merchants are now allowed to surcharge their customers who pay using a credit card. Sunday marked 60 days from the date the settlement received preliminary approval from a federal judge. Were the settlement to fail, the surcharge provision would be rolled back.

Few, however, believe many consumers will be affected by merchants’ new prerogative. Settlement or no, surcharging remains illegal by statute in 10 states—California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas—representing about 40 percent of U.S. retail sales. Large retailers that operate in the 10 restricted states are not likely to surcharge in their stores in other states, according to reports. Also, for merchants that accept American Express, which does not permit surcharging, the terms of the agreement prohibit them to surcharge on Visa or MasterCard cards.

“The bottom line,” an National Retail Federation spokesperson said in a published report, “is that very few retailers would be able to surcharge under the settlement, and that the vast majority don’t want to surcharge even if they could.”

Final approval of the settlement, if it comes, is not expected until late this year.