New York State and credit card "checkout fees"

credit card cornersFinancial services regulation fact of the day: starting this week merchants around the country are allowed to charge customers a "checkout fee" for using a credit card (even if many won't necessarily do so), as a result of a multi-billion dollar anti-trust settlement with Visa and Mastercard. But there won't be fees in New York State. [CNN] [NYT] [Consumerist]

Why? Because New York is one of 10 states that prohibit such fees. From the state code:

No seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means. Any seller who violates the provisions of this section shall be guilty of a misdemeanor punishable by a fine not to exceed five hundred dollars or a term of imprisonment up to one year, or both.

What New York doesn't prohibit: offering customers a discount for using cash, as some gas stations do*. It also doesn't prohibit minimums for using a credit card, though retailers have to notify customers of the minimums. And the minimums -- typical upper limit is $10 -- have to apply to all types of credit cards. The allowance of minimums is relatively recent -- a 2010 federal law opened the way for them. [Consumerist]

The structure of the transaction fees that businesses pay credit card companies is... complicated, and there's an argument that it results in a "reverse Robin Hood" effect, with people who use credit cards -- especially rewards cards -- being subsidized by people not using the cards. [NYT]

* There's a bill in the legislature that would prohibit this price difference at gas stations -- but it would also allow the stations to pass along the credit card transaction fee to consumers. (It's aimed at cutting down on large gaps between credit and cash prices -- like a $1 gap in Long Island last year.) [Newsday]

[via MeFi]


Giant step backwards. We should be moving toward a cashless society (money is filthy, people kill for cash, cash fuels an untaxed underground economy, etc) but this will reverse it. I have chosen not to do business with any gas stations that hide these surcharges as cash discounts, and I will do the same for any other merchants that want to penalize me for not wanting to have lots of cash on my person all the time. I would urge folks to immediately apply for a concealed gun permit, with the legitimate reason that you will be carrying large amounts of cash and will need the ability to protect yourself. If you have no criminal record and a few friends or relatives as positive character witnesses, the government will have no choice but to grant the permit. Then lets see how pissed these same politicians get who wanted stricter gun control.

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