Colleges may soon be able to charge a credit card surcharge on all credit card transactions according to a Wall Street Journal article. According to the article, it appears Visa and Mastercard may be ready to settle a year long lawsuit with retailers agreeing to allow a credit card surcharge and reduced interchange fees.
Currently, Visa and Mastercard contracts prohibit merchants from adding a surcharge as a swipe fee on credit card transactions. But merchants want the ability to add the swipe fee in order to cover the costs of the transaction fees.
Discover and American Express do allow a swipe fee as long as the merchant charges the swipe fee on all credit cards. Since Visa and Mastercard prohibit the swipe fee it is a hollow provision.
Because the transaction fees can be as high as 2.75% for some colleges, many colleges and universities do not allow credit card payments for tuition, room and board. However, many colleges do accept credit card payments made online or over the telephone which they deem to be conveniences and therefore are allowed to charge a convenience fee to cover the costs.
Currently there are 10 states, including California and New York, with laws that prohibit charging a credit card surcharge. However, the California law (Section 1748.1 of the California Civil Code) exempts the state, municipalities and public agencies from the law which allows the public colleges and universities to charge a swipe fee.
To get around these laws and Visa and Mastercard merchant rules, merchants a have built the cost of credit card processing fees into their pricing then use discounts for payments made with cash or check.
Visa and Mastercard allows merchants to charge a surcharge could be a huge benefit to colleges and universities looking to streamline walk-up and in-person payment processing and reduce the associated costs of cash and check handling.
The potential downside is that many retailers and suppliers’ prices already have credit card processing costs built in. By adding a swipe fee as a credit card surcharge, they will in effect be double dipping. Some might decide to look into online credit card processor for alternative solutions.
So colleges may need to adjust their pricing in campus retail food services, bookstores, events tickets, concessions, and eCommerce areas or risk upsetting customers. I would even suggest an institutional policy might be needed to define when a credit card surcharge will be added as a swipe fee versus built into the cost of doing business.
Another possible downside is that colleges may need to rethink their use of corporate purchasing cards (P-Cards) if they are going to be hit with swipe fees on every transaction.