Down to Business: Target right to oppose charging fee

Big-box retailer Target says it won’t tack on a surcharge at the register for customers who pay with

Thanks, Target.

The big-box retailer says it won’t tack on a surcharge at the register for customers who pay with plastic rather than cash — an option stores are set to get in a long-running legal battle with credit card companies Visa and MasterCard.

The fight was over so-called “swipe” fees — the 1.5 percent to 3 percent of a transaction that is charged to process a credit card payment. Merchants, alleging collusion in setting the rates, sued Visa and MasterCard in 2005. They say the fees are their biggest expense after labor and rent.

Under a settlement announced July 13, retailers won a $6 billion lump-sum award and a temporary rollback in swipe fees. They also will see an end to the merchant surcharge rule — a provision in their contract with the credit card companies that kept them from adding a fee at the register to cover the cost of processing transactions.

It’s hard not to have a knee-jerk reaction to paying more to swipe, even if such an add-on already is barred by statute in New York and nine other states and will not be affected by the settlement.

But elsewhere, The Wall Street Journal reported, business owners are weighing the risk of alienating credit card customers by charging them a fee at checkout. A poll the paper ran with the story, asking readers whether they’d pay more to use a card over cash, showed 92 percent of the nearly 5,000 respondents opposed.

I wondered, though, whether in states like New York, stores might mimic gasoline retailers and offer a discount for paying with cash — a legal way around the no-credit-surcharge rule. You may recall that when gasoline prices ran high earlier this year, stations on Long Island began discounting cash payments by as much as $2 a gallon. Credit card customers were livid at the $3.99-a-gallon price for cash vs. $5.99 for plastic.

The Retail Council of New York State, a trade group in Albany, declined my request for comment on the issue, saying it was “still studying the terms of the proposed settlement and [we] have not reached any conclusions.” But I was still happy to see Target take a stand last week against the surcharge as it criticized the settlement.

This week, Walmart, too, said the settlement was bad for retailers and consumers and called on more merchants to oppose it. (The settlement needs a judge’s approval to become effective; the more retailers that oppose it, the less likely that OK is.) But Walmart also offered this observation in its statement: “We believe the proposed settlement would also constrain emerging payments innovation.” And that, I think, is worth contemplating.

These days, cash no longer is king.

It’s not dead yet, but we stepped over a threshold in 2003, according to data from the American Bankers Association: U.S. consumers are more likely to use credit, debit and other cards to buy goods and services than cash and checks.

We’re a plastic nation: we bank online, we buy online. Soon, we’ll all be bumping smartphones to transfer money among us.

Segregating by payment type at checkout? It seems so 20th century.

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