Proposed legislation may prevent companies from charging swipe fees
April 17, 2013

A recent lawsuit against Visa and MasterCard by a group of retailers required the credit card companies to allow those retailers to charge a swipe fee to cover equipment and processing costs. However, proposed legislation in a couple of states may prohibit businesses from introducing surcharges to accept credit card payments.

Legal investigation helps small businesses
According to Forbes, companies now have the choice to instigate a card transaction fee if they wish. This excludes debit card payments and the 10 states that already have legislation against surcharges. The news source also reports retailers that do not already accept plastic may begin to do so to drive sales among customers loyal to the payment method.

For accepting certain credit cards, such as Visa or MasterCard, companies are charged a swipe fee per sale by the issuer. The surcharge from credit card companies and banks tend to be a certain percentage of the sale, such as 4 percent. Transaction fees caused retailers to pay over $50 billion to credit card companies in 2011 alone, according to the Salt Lake Tribune. 

The newspaper reported the interchange fee is not physically designated on credit cards and Visa has 60 various categories for fees while MasterCard has more than 240.

By instigating their own swipe fees, retailers have the opportunity to make up the difference without causing a disruption in services or product prices. 

Merchants may be required to stop charging swipe fees
However, many states that do not prohibit companies from applying swipe fees are introducing laws against the surcharges.

For example, proposed legislation in Michigan could ban only certain retailers who take plastic from imposing transaction fees, but not others. An amendment may allow gas stations to instigate the surcharges, resulting in different gas prices depending on whether one uses cash or credit. Small businesses that do not fall underneath the legislation's exceptions may once again have to pay the credit card companies swipe fees. 

Although more states are beginning to adopt legislation against swipe fees, accepting credit cards is still a financially secure option for companies looking to expand their client base. Offering consumers the ability to purchase using plastic drives sales and customer retention, as many do not feel financially secure carrying large amounts of cash. As credit card usage increases among consumers, retailers may not want to alienate any customers, despite the need to pay credit card company fees.

Nexus: G-WEBCD1