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Accept credit cards? Can you charge a convenience fee to accept credit cards?

POSTED BY: Rhett Baylies
Accept Credit Cards? Can you charge a convenience fee to accept credit cards? Find out!

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A recent victory for business owners to reduce the cost to accept credit cards.

If you accept credit cards there is very good chance you are tired of the paying high credit card processing rates.

  Wish you could charge a convenience fee to help with the cost?  Well now you can!  The 7 year class action lawsuit between merchants and the major card brands and banks over interchange fees has come to an end.  Not only did the major card brands offer a settlement of about $7.25 Billion available to a little over 7 million merchants to settle the claims that Visa, MasterCard and many of the nations largest banks conspired to restrict competition.  The settlement is represented by a lump sum of $6.05 billion dollars and a temporary reduction in Interchange Rates that is estimated to add an additional $1.2 billion.  According to many merchants the “biggest” win of this ongoing battle is that merchants are now allowed to pass the cost of accepting credit cards onto their customers in the form of a convenience fee of 1-3%.  This comes shortly after the Durbin Amendment which also gave merchants some say on the cost to accept credit cards.

Is charging a convenience fee to your credit card toting customers a good idea?

  You be the judge as there are many sides to this argument.  It seems that the vast number of consumers in the market place are outraged that they could be charged a convenience fee for using their credit card.  This is because, from the consumers’ perspective, they believe that they are already paying for this convenience in the purchase price to begin with.  Simultaneously merchants feel like Visa/MasterCard and the banks are taking advantage of them by knowing that they do not have a choice but to accept credit cards and endure the fixed cost of accepting credit cards.  Of Course most consumers feel like they are being overcharged for goods and an additional 3% could be the straw that broke the camels back so to speak.  Meanwhile merchants argue that without the ability to pass on this cost that they will have to further raise the cost of their goods to everyone which is not “fair” to their cash paying customers.

What are business owners saying about the convenience fee and settlement in general?

  It seems that the merchant coalition should been more clear when they outlined their goals with their attorneys.  I say this because some of the biggest proponents of the 7 year lawsuit including Wal Mart are already denouncing the settlement.  It seems that if approved this settlement has missed the target goal which is lower the cost to accept credit cards permanently and not just as a short term band aid.  This settlement does not do this unless you are willing to potentially alienate some of your hard earned loyal customers.  This is because it does not provide for any long term reductions or caps on interchange rates.  Speaking of the Interchange portion of the settlement:

Will your business even benefit from this landmark settlement regarding Interchange Fees?

  First lets look at the lump sum settlement (if approved) - the general provisions of the cash settlement are that you may be a member of the class lawsuit if you accepted Visa or MasterCard credit cards or debit cards for payment at any time since January 1, 2004. At this time no action is required of merchants to receive the money or other benefits of the class action. You are not required to sign up with any third party to assist you in filing a claim.  Notice will be made to merchants beginning in late 2012 or early 2013. One of the law groups representing the class action lawsuit Robins, Kaplin, Miller, and Ciresi will be posting periodic updates on their website at

What about the temporary reduction of Interchange Rates and Fees?

  It sounds simple that if Visa MasterCard are going to reduce Interchange rates and fees that your business will automatically benefit, right? WRONG.  Why?  Just as with the Durbin Amendment ruling there are hundreds of thousands of merchants who will not see a dime of savings.  This is due to the fact that Merchant Service Providers (or credit card processors) are NOT mandated to pass on the savings.  The only way ensure that your business is going to benefit is to make sure that you are being billing on an Interchange Plus schedule.  If you are on an Interchange Plus pricing schedule then the savings will be automatic, however, if you are billed for your credit card processing via bill back or on a tiered rate structure then most likely your rates will remain the same.  Just as there are tens of thousands of merchants who have not seen a reduction in the cost to accept debit cards as a result of the Durbin Amendment there will be many more who will not benefit of this temporary reduction in Interchange Rates.  The Merchant Doctor is an advocate of Interchange Plus pricing due to its transparency and fairness to the business owner.  If you have any questions about how you are being billed Contact Us for a no pressure or obligation analysis of your merchant services.

Will Interchange Fees be permanently reduced as they were with the Durbin Amendment?

  The terms of this settlement are said (by K. Craig Wildfang of Robins, Kaplan, Miller, and Ciresi) to “Over time, the reforms induced by this case and in this settlement should help reduce card-acceptance costs to merchants, which in turn, will result in lower prices for all consumers.”  Without a fortune teller it is hard to say whether or not this settlement will lead to price competition within the Interchange Fee schedule.  Personally we do not see how this is going to “increase competition” and encourage lower interchange rates more than temporarily.  We think that the Durbin Amendment and this new Antitrust settlement are simply stepping stones to the true objective for merchants which is a lower more fair cost to accept credit cards.  Now that the armor of the sacred Interchange system have been chinked the doors are most likely going to open for more future class suits.

At the Merchant Doctor we have always been advocates of fairness and transparency in business and are un effected by these mandates or any changes to the Interchange Fee schedule, however, just to be the devils advocate:

What would you say if the government ruled that you were making too much money in your business?  Lets hear it!

If you found this article helpful then please leave your comments or questions below and share it on your favorite social media site. You will also love our other posts that demystify and empower you to make sure that you are getting a good deal on your credit card processing.  Better yet if you are not happy with the amount you are paying for your credit card processing or are still having problems understanding your credit card processing statement then simply visit our Get a Quote page so that the Merchant Doctor can show you what we can do for your business with our Low Rate Guarantee.  Join us on FaceBook, Google+, Twitter, or LinkedIn.

About the Author: Rhett Baylies

After over 17 years in the service industry not only as an employee but business owner and corporate manager Rhett decided to start his career in the Payment industry with the vision of providing good honest service at a fair price. Rhett now applies his years of service focused business to his daily routine and looks forward to revolutionizing the way you look at your processing statement for many years to come.

Rhett Baylies's avatar
mark | October 26 2012

Great intel on latest victory for business owners. Thank you. Question You said merchants can charge a fee if they want but customers most likely wont like that. I agree. But you also said to have merchants tell customers to switch to a debt card which carries a lower fee and give them and incentive discount to do so. Got it. But how much of an incentive do you give the customer to make the whole conversation about switching cards go away? I mean if it cost 3% to have a customer use a rewards card and you give them 2% discount if they use their debt card and figure the cost of the debt card into the equation your just about where you started. Great website!

Jody | May 04 2016

I am one of those who stand to gain something if they ever pay out. I was processing for about 5 years and got all the info regarding this settlement. So far not a dime I have seen but live in hope. It is still in appeals.

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