Getting Swiped: California Consumers, Credit Surcharges, and SB 933

Sometimes it’s hard to balance consumers’ interests with businesses’ interests. But when it comes to point-of-purchase bank card surcharges, a new report has made the line between fair and unfair much clearer.

Getting charged for charging has been a fact of life for many consumers. And if a fee is protested, a helpless cashier explains that it’s expensive for the business to accept plastic. And, anyway, it’s only fifty cents. So we bought the story along with our purchases (and paid the increased price). 

What is the full story behind those fees? The national report identifies the arguments made by retailers to justify fees on bank card purchases. First of all is the claim that “accepting bank cards for payment represents a negative net cost” to the business, and “customers who pay with cash or check are disadvantaged” because they must pay the increased prices that result. If merchants “were allowed to impose surcharges on bank card users, they would then reduce prices.” Mom-and-pop shops and even larger chains suffer from the costs of accepting plastic, some argue.

But that’s backwards. The reality is that retailers enjoy lower costs and competitive advantages as a result of accepting your plastic. The report cites research showing that it’s in fact cheaper to handle bank card transactions, that businesses do so for strategic reasons in order to compete in a cashless society, and that accepting cards increases sales. Consumers are being charged a fee for doing businesses a favor, and that’s wholly unfair.

Because the majority of purchases are made with plastic these days, there’s a certain inelastic “inertia” in swiping as opposed to switching to cash to avoid point-of-sale fees. And that’s another reason the fees are so unfair. They take advantage of the fact that fewer people use cash nowadays, and they’re sprung on customers who have already decided to make a purchase.

California is one of ten states that outlaws surcharge fees for credit card transactions, but somehow debit transactions slipped through. 

Senate Bill 933 (Oropeza), which is pending a floor vote in the Senate, would close this loophole. Consumer’s Union, the publisher of Consumer Reports, is sponsoring that bill. The San Francisco Chronicle‘s Editorial board recommends a national effort as well. BP America, the owner of Arco gas stations infamous in California for that $.45 fee, opposes.

This is a simple case of consumer fairness, and it’s not about hurting business. Businesses benefit from accepting plastic payment. And those that would like to decrease their payments to credit card companies can offer a point-of-sale discount on cash transactions. In any case, the justification for swipe fees is being justifiably wiped out.