Businesses could soon charge more to customers who use credit cards instead of cash. It's the outcome of a major lawsuit settled Friday, between millions of retailers versus Visa, MasterCard and a slew of banks.
Credit card companies charge businesses every time customers use plastic instead of cash. In the 21st century, many business owners would agree that paper has given way to plastic.
Hamooda Shami, owner of the new taco bar, Don't Look Back, in Carytown, says 80 percent of his customers whip out their cards instead of cash.
"It's ease of payment for the customer, which increases sales in the long run...but it's definitely a tradeoff because credit card companies get their cut," said Shami.
The tradeoff is through swipe fees. Customers tend to buy more when using plastic. Credit card companies can charge owners up to nearly four percent for that convenience. "It's definitely a big bill at the end of the month when you see how much the credit card companies get out of your bottom line," added Shami.
After a seven-year, class-action lawsuit brought on by companies like Kroger and Walgreens, Visa and MasterCard have agreed to lower their swipe fees and let stores start charging their customers to make up for some of the costs. Businesses can now pass the two to three-plus percent credit card surcharge on to their customers, if they choose to.
Tobacco Club and Gift store owner Adam Othman says he pays hundreds of dollars a month in swipe fees. However, Othman says he'd hesitate to charge his customers more.
"Some people might get mad and not come back…You don't want to do that," said Othman.
Many business owners will now be looking at all aspects affecting their bottom line. Shami says it would be too much of a burden on his customers to take on the extra charge, potentially his hurting business.
"(Customers) are paying five percent to the state of Virginia. They're paying six percent to the City of Richmond...on top of what they're paying you (the business)...To pass on credit card fees would be price gauging them," said Shami.
Visa, MasterCard and the banks also agreed to pay $7 billion to the retailers that sued them.
Even though a settlement was reached, the agreement still needs a court approval, and there could also be appeals.
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