A Charge for Using Your Rewards Card?

For many consumers, paying a nominal annual fee for a rewards card is worth it. They use their plastic to purchase just about everything (including a cup of coffee) and pay their bill in full each month—racking up a load of points in the process. But that savviness may one day no longer pay off.

That’s because of a recent settlement involving Visa and MasterCard in which they agreed to allow merchants the ability to charge customers a surcharge for paying with a credit card. This added surcharge would offset “swipe fees” that retailers pay to credit card companies every time someone makes a purchase with plastic. According to Trish Wexler, spokesperson for the Electronics Payments Coalition, “retailers can only charge up to what they pay to accept the card, which, in the U.S., averages between 1.5 and 3 percent of the total purchase.” Rewards cardholders could be hit the hardest, since these credit cards tend to have some of the highest swipe fees.

Consider this situation: If you bought a $100 sweater, for example, you’d end up paying an additional $1.50 to $3 simply for using your rewards card. You may earn around a 100 or so rewards points for making the purchase—but you’ll be left in the red since each point tends to have a cash value of about one penny.

For those of you trying to accumulate enough miles for a trip to Australia or points to purchase a new iPhone, you’re in luck. Most experts agree that while retailers could implement these surcharges, it’s unlikely that many will do so. “If consumers suddenly get asked to pay a surcharge, they’ll take their business to a competitor who isn’t charging it,” says Beverly Harzog, consumer advocate and credit-card expert. That’s especially true for those who expect to earn rewards by making purchases: “Consumers who are ‘power users’ of rewards cards profit from their cards. If they can buy a product at a store that has no surcharge, that’s where they’ll purchase it.”

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And with the prevalence of online shopping, if all your local stores are hitting you with the surcharge, you can simply hop on the Internet to get all your groceries, clothing, and household supplies. (According to Wexler, it’ll be easy to tell which stores are levying the surcharge because they will be required to prominently post the information in the store and on the first page of their website.)

And it’s not only consumers who have balked at these surcharges. Big-box retailers such as Walmart and Target have publicly expressed displeasure with the settlement, so it’s unlikely that they’ll be charging their customers to use credit cards anytime soon. The National Association of Convenience Stores, The National Grocers Association, and The National Retail Federation oppose the settlement as well.

That being said, some retailers may choose to charge consumers for the privilege of paying with plastic. “There’s more incentive for small stores to add the surcharge because it saves them money,” says Harzog. Especially if they offer unique products and don’t really have any competitors.

So you, the consumer, will have to weight your options: Do you want to earn points or do you want to pay less? You might have already faced this decision when filling up your car with gas at a station that offered a discount for paying with cash. But for now, it looks like your rewards card will continue to be, well, rewarding.


Editor’s Note:

Though merchants can now charge customers for using a rewards card, it doesn’t look like it will become a common practice anytime soon.

-Captain SuperMoney