Probably not. But it could happen.

The recent class-action suits against the major three credit card issuers–Visa, MasterCard, and American Express–ended in settlements that will allow merchants to add a surcharge to credit card transactions. This is not good news for avid mile & point earners.

This could be really bad news. The agreement will allow retailers to charge a higher price for purchases made by credit card. This will essentially allow merchants to cover the swipes fees (typically 1 to 3 percent) that pay to the card issuers.

If this is widely adopted by merchants, most of the rewards you can earn from spending on a travel reward credit card will be negated by the higher price.

Typically you can earn 1-2 percent back across the board on purchases with a reward credit card, and if you end up paying that much or higher just to pay by credit card, then it won’t be worth it.

But here’s why you don’t have to worry…

For a lot of people, earning lots of airline miles and points is 80-90% about the sign-up bonus.

If anything, these fees would only increase the number of people that use the card only to hit the minimum spend to earn the bonus. It would still be worth it to spend say $2,000 on the card to earn 50,000 bonus points. After that, you could just put the card in the sock drawer and switch to cash.

Although there are others that prefer to manufacture spend or just earn points from big annual spending.

Yes, if these surcharges are widely adopted, then it will take away from earning points from daily spending. In my opinion, it’s likely that some mom-and-pop stores will utilize this to cover the swipe fees, but large retailers will not follow suit because there is too much competition.

Time and time again, it has been proven that people spend more money when swiping a card vs. paying with cash. The psychology is that you don’t see the immediate depletion of funds when using a card.

On top of that there will also be the store down the street that doesn’t charge surcharges. Merchants don’t want to lose your business to a competitor over a 1-3% fee so I suspect that retailers will waive the surcharges with a minimum purchase.

Merchants understand the value of accepting as many different forms of payment as possible and certainly the benefits of allowing payments with credit cards.

A while back, I had read an article that explained that the lawsuit was more about merchants pushing to have swipe fees reduced, rather than giving them freedom to charge the fee.

The bottomline is that it’s doubtful (in my opinion) that we will see credit card surcharges widely adopted. There might be the occasional mom-and-pop store or small business that will enact them or require a minimum purchase, but it would be hard to imagine major companies doing so because of the risk of losing significant revenue.

What’s your take on it, will we see more credit card surcharges in future? Would you spend cash more often if you had to pay a credit card surcharge of 1-3%?

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    • Others states that ban credit card surcharges include California, Colorado, Connecticut, Florida, Kansas, Massachusetts, New York, Oklahoma and Maine. On top of that 18 states are considering a ban.