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Retailers Rejoice With Ban On Credit Card Fees

By Fatima D. Lora

I was concerned when I heard the news in January about surcharges to be applied to consumers using credit cards at point of sale. Retailers weren’t too thrilled, either. As a result of merchant feedback, a Senate panel here in New Jersey recently banned these POS surcharges, just about one week after they went into effect.  

Swipe fees not only impact the retailer, but affect consumers as well. In fact, many retailers nationwide have cited swipe fees as their second or third highest cost behind salaries and employee health benefits, according to an NRF statement. “With retail industry profits averaging only about 2%, there is no room for retailers to absorb the expense, so swipe fees are passed on to customers in the form of higher prices,” according to the statement. “In addition, card industry contracts and practices have required that merchandise be priced at the credit card price — including the swipe fees — and have made it difficult to either show the fees to customers or to offer a cash discount. By NRF estimates, swipe fees cost the average U.S. household $427 a year and hurt retail sales because consumers buy less when prices go up.”

For Paula Rosenblum, Managing Partner at Retail Systems Research, charging a swipe fee on credit cards is pointless because within a week some other merchant will stop charging that fee, and consumers will just move along to the next retailer.

“There are many alternatives merchants are exploring to help reduce their swipe fee exposure,” Rosenblum said. “They’re creating their own exchange — MCX — and buying processors, such as Starbucks’ investment in Square. I expect other solutions to follow.”

Ed Mierzwinski, Director of Consumer Programs at U.S. PIRG agrees with Rosenblum: “In the brick-and-mortar world, no one who does any sort of volume business is going to want to surcharge because it will drive their customer crazy and slow down transactions,” he said in a MailOnline article.

After speaking with several merchants nationwide, NRF reported that none were willing to add the surcharge at the point of purchase — a blessing for consumers.

 Although it may have caused an uproar in the retail community, it’s good to see that this issue has been settled. Shopping spree, anyone?

Follow Fatima on Twitter: @FatimaDLora