Paying More Because You’re Paying With a Credit Card

Developments in two cases in the last week have the potential to change pricing practices everywhere from big box retailers to corner coffee shops — but whether they actually do remains to be seen.

On Thursday, a group of small and midsize businesses reached a settlement agreement with American Express in a class-action lawsuit. Under the agreement, which a judge must approve, Amex will allow surcharges to its cardholders as long as the same amount is levied on other credit and charge card users. It agreed to drop a measure that required debit card surcharges at the same level, according to a lawyer representing the company.

The deal comes less than a week after a judge approved a settlement that included a similar change of rules in a huge class-action lawsuit against Visa and MasterCard, billed as the largest private antitrust settlement in American history.

According to the New York Times, agreements with three major credit companies — American Express, Mastercard, and Visa — are clearing the way for retailers to institute “two-tier pricing,” which means charging people more at the register for paying with their credit cards than with a debit card or cash. It is not widely known that businesses pay fixed “swipe fees” to credit card companies whenever customers use their credit cards, which they’ve generally made up by increasing the price of their goods. Other businesses (illegally) post signs indicating that a minimum purchase of $5 or more is required if customers pay with a credit card. Some places — I can think of the place where I get my haircut as one — post signs telling customers explicitly that they are charged a fee for credit card use and that paying by cash would be appreciated. A representative from the National Retail Federation said retailers generally have no interest in two-tier-pricing, but would much rather see transaction fees get reduced. But if you’re ever told that there’s a surcharge for using your credit card somewhere in the near future, this will be the reason why.

Photo: Consumerist

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