NEW YORK — Credit card surcharges are becoming common enough that they are changing how many Americans pay — and potentially where they shop — with women and lower-income consumers particularly likely to alter their behavior to avoid the fees, according to an analysis by CardRatings.com.
The latest CardRatings.com Cardholder Satisfaction Survey, which polled more than 2,700 U.S. credit card holders, found 61.6% have encountered surcharges for paying by credit card.
Slightly more than half of consumers who have encountered the fees said they affect how they pay for purchases. Overall, 31.6% of respondents said they avoid using a credit card when a merchant imposes a surcharge.
Becoming an ‘Annoyance’
CardRatings.com said the findings suggest surcharges are becoming more than an annoyance for consumers. They are beginning to influence payment choices and could affect where consumers choose to do business.
A credit card surcharge is generally assessed as either a percentage of a transaction or a flat fee and is intended to offset the interchange fees merchants pay to process card transactions.
While a surcharge may be relatively small on an individual purchase, CardRatings.com noted that percentage-based fees can become significant on large purchases and can accumulate when imposed on routine transactions.
Notable Differences Uncovered
The survey found notable differences in how consumers respond.
Among cardholders who have encountered surcharges:
- 55.9% of women said they try to avoid using their credit cards when merchants impose the fees, compared with 46.7% of men.
- 54.2% of consumers earning less than $70,000 annually said they avoid using credit cards when a surcharge applies.
- 48.5% of consumers earning $70,000 or more said they would avoid using their cards in those situations.
- Lower-income consumers were also less likely than higher-income consumers to say surcharges were not a concern because they rarely encountered them.
CardRatings.com said the income differences could indicate that consumers with tighter budgets are more sensitive to additional transaction costs and more likely to notice and respond to them.
The analysis comes as merchants, card networks, lawmakers and courts continue debating interchange fees and merchants’ ability to pass those costs directly to consumers, as the CU Daily has been reporting.
Significant Variances by State
Surcharge rules vary significantly by state. According to the National Federation of Independent Business, six states — California, Connecticut, Maine, Massachusetts, Oklahoma and Texas — have enacted laws prohibiting credit card surcharges. Other states require disclosure of the fees or place limits on how much merchants can charge.
Some surcharge restrictions are being challenged in court, while lawmakers in other states continue to consider new regulations.
Visa, Mastercard Settlement
The issue is also tied to the long-running dispute over interchange, or “swipe,” fees.
Visa and Mastercard last fall proposed a settlement in a decades-long interchange-fee lawsuit that would provide $38 billion to merchants and include measures aimed at reducing interchange costs. The proposal would also give merchants greater ability to decide which cards from an issuer they accept, potentially allowing them to decline higher-cost rewards cards.
The settlement still requires court approval and has drawn objections from merchant groups.
CardRatings.com said lower interchange costs could theoretically reduce merchants’ incentive to impose credit card surcharges. For now, however, its survey suggests consumers are increasingly responding to those fees by changing how they pay — and, in some cases, where they spend their money.
