Is Your Merchant Charging the New Credit Card Surcharge Fee?

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In 2005, retail merchants got together and sued the credit card networks, in part, because of a little-known fee called “interchange.”

Interchange, more commonly referred to as the “swipe fee”, is the fee charged by the credit card networks to the retailers for the privilege of accepting payment via a credit card. That fee normally equals somewhere between one and four percent of the price of the item you’ve purchased.

Most retailers will bake that fee into the price of the merchandise. As such, it’s already fully covered by the buyer regardless of how they choose to pay for the item.

For example, if you buy an item for $100, you can assume that between one and four percent of that price ($1 to $4) is being paid to a credit card network and has already been added to the price of the merchandise as a result.

If you pay in cash, you’re essentially paying for the privilege of using your credit card despite that fact that you’re not doing so.

New Surcharge Fee

Starting Sunday January 27th, a settlement resulting from the aforementioned credit card lawsuit will allow merchants to begin charging a surcharge fee designed to cover their cost of accepting credit cards.

The settlement, reached last July, amends language in the credit card network contracts that previously disallowed variable pricing by payment method, although some merchants have been engaging in the practice for years.

Which States are Charging the Fee?

The fee MUST be overtly disclosed before you make your payment. And, ten states have already passed legislation outlawing these so-called “check out” fees.

These states are: California, Texas, New York, Florida, Oklahoma, Massachusetts, Maine, Kansas, Connecticut and Colorado. If you live in one of those states, then you won’t be charged check out fees but you’re already paying for them in the price of the merchandise, so don’t gloat!

If you make purchases online, then you are also subject to check out fees if you use a credit card. And, the merchant does not have disclose the fee until you start the check out process and select “credit card” as your method of payment.

Additionally, if you are buying online and the merchant does choose to hit you with the fee, you won’t know how much it is until you choose a credit card type.

Which Companies are Charging the Fee?

The interchange fee that’s being covered varies by network (Discover, Visa, MasterCard). Rest assured, the merchant isn’t profiting from the fee. They are only allowed to cover their costs, not add a mark up to the fee amount.

NOTE: American Express was not a party to the lawsuit, so there will be no fees added to Amex transactions.

The fee is not mandatory. In fact, merchants do not have to charge you anything more than you are already paying. Most experts initially believed the mega retailers would skip the fee altogether or test it in markets as a way to gauge customer reaction before rolling it out on a larger scale basis.

However, as the information regarding the settlement becomes clearer, it now appears national chains will NOT be allowed to charge the fee.

Apparently, the fee can only be charged if it’s charged uniformly across all states. So, if you choose not to charge the fee in one state you can’t charge it in the other 49 states.

And, because 10 states have outlawed the fee, any business that operates in those 10 states cannot charge the fee in the other 40.

So, it looks like the fee can only be charged by companies that do NOT do business in the aforementioned 10 states.

How to Avoid Paying It

If you do see signage warning of new credit card fees, there are some things you can do as a result, although none of them are convenient.

You can certainly protest with your wallet and take your business down the street to a retailer that isn’t charging the fee.

You can pay with cash or a debit card, but keep in mind you’re still paying a fee to cover the interchange, albeit not a new and separate fee.

Finally, you can use a rewards card that gives you cash back, which would help to offset the added cost of the merchandise.

John Ulzheimer is the President of Consumer Education at, the credit blogger for, and a contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and, John is the only recognized credit expert who actually comes from the credit industry. The opinions expressed in his articles are his and not of or Intuit. Follow John on Twitter.


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