Will “Checkout fees” harm consumers’ pockets?
After a seven year battle that began in 2005, the lawsuit filed between dozens of retailers over credit card processing services fees has finally reached a settlement. Visa and MasterCard agreed to pay dozens of retailers more than $7 billion dollars in the settlement. The retailers had alleged that banks and credit card processing companies were charging them “swipe fees” whenever a consumer used a credit card. They claimed that this prohibited them from having consumers use cheaper forms of payment.
Due to the settlement, retailers are now able to charge a “checkout fee,” which will be paid by the consumer whenever they use a credit card to complete a transaction. Retailers were previously not allowed to charge the consumer; this forced them to pass the costs on to the consumer, regardless of their payment method. Now, however, retailers will be able to charge only those consumers who use the more expensive forms of payment, credit cards.
Although the settlement is beneficial to retailers and consumers who use debit or cash, it is going to have costly effects for credit card consumers. Senior financial analyst Greg McBride from Bankrate stated, that, “All this is going to do is transfer money from the pockets of the banks into the pockets of the retailers and its going to come at the expense of consumers.” This can have the effect of alienating credit card users and potentially pushing them towards other retailers.
Credit card users also suffer as a result of this. Not only do they have to pay $7 billion to retailers, but they also have to deal with greater regulation.
It will be interesting to note how this affects both retailers and consumers, as well as how it effects credit card processing services.