One of the largest business expenses for Santoni's Supermarket in Highlandtown is interchange fees — what the grocer pays a bank to process customer's credit card transactions.
Even so, Santoni's has no plans to charge shoppers more for paying with plastic.
"That would be retailer suicide," says Rob Santoni Jr., the grocer's chief financial officer.
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Merchants haven't been allowed to add a surcharge to credit card purchases, but that would change under a proposed settlement announced last month to resolve a seven-year legal battle over interchange fees. Retailers had accused Visa, MasterCard and the big banks of colluding to raise interchange fees, sometimes called swipe fees.
As part of the $7.25 billion antitrust settlement — the largest ever — Visa and MasterCard would lift restrictions that have prevented retailers from slapping a fee on customers using credit cards. (American Express already allows retailers to add a surcharge, on the condition that they do the same for all card payments.)
If the settlement receives preliminary approval by the judge in the fall, consumers could be paying more for using credit cards as early as next spring, according to the Electronic Payments Coalition, which represents Visa, MasterCard and card issuers. The coalition says it was merchants that wanted the ban on surcharges lifted.
"We did not want them to have this ability," says Trish Wexler, a coalition spokeswoman. "We think it's anti-consumer."
This seems to be a mixed blessing for retailers, and bad news for consumers who frequently pay with plastic for convenience or to rack up card rewards.
A surcharge would allow retailers to recoup their cost for card processing, but adding a fee could alienate customers. Or it could prompt consumers to pay with cash, and that's not good for business because customers tend to spend more when paying with credit cards.
Not all retailers are happy with the settlement, which includes cash payments to retailers and a small reduction in swipe fees for eight months. Wal-Mart, Target and the National Association of Convenience Stores are among those opposing the settlement, saying it does't fix the "broken" system. Opponents also complain that the settlement won't prevent fees from going up and stymies the growth of lower-cost payment options.
"The settlement doesn't bring about real reform that we need as retailers," Santoni says.
The settlement sounds like a big number, but represents a small percentage of the fees collected by the banks, he says. The National Association of Convenience Stores says $7.25 billion is less than two-months' worth of interchange fees.
If the settlement is approved, retailers would be able to add a checkout fee to credit card transactions to cover processing costs — usually 1.5 to 3 percent — although they can't charge more than about 4 percent, Wexler says. Merchants also would have to post the fee on their doors, at registers and on the customers' receipts, she says.
Ten states prohibit such surcharges. Maryland isn't one of them, which opens the door for consumers here to be charged.
"I'm not going to be the first to do it," Santoni says.
Other Maryland businesses agree.
"Competition alone won't let a surcharge happen," says Kirk McCauley, director of member relations for the Washington, Maryland, Delaware Service Station and Automotive Repair Association.
McCauley says his members would have preferred a permanent reduction in interchange fees that now eat up about 8 cents of every gallon of gas sold. That's why about 10 percent of stations offer a discount of about 5 cents a gallon to customers paying with cash, he says.
"It doesn't always work," McCauley says. "In some areas, people will pay with a credit card. They don't want to carry $80 around in their pocket just for gas."
Alan Hirsch, co-owner of Donna's restaurants, says swipe fees are a significant expense, but he doesn't think adding a surcharge "would be a nice thing to do."
"People are used to paying with credit cards for so long without being charged," he says.
Still, he adds, "if everyone else started to do it, we would have to follow suit."
No one seems willing to lead on this in Maryland —yet.
Eric Stein, owner of Decanter Fine Wines in Columbia, says he hated when his suppliers added a surcharge to deliveries a few years ago to cover the rising cost of gas. He says he wouldn't treat his customers like that.
"I would never put a charge on a transaction," he says. "I just can't see my customers willing to accept it. I want to keep my customers, not send them away."
Stein along with some other retailers, however, do require consumers to spend at least $5 if they want to use a credit card.
It may take some months before these issues surrounding the settlement are resolved.
Though retailers say they don't anticipate assessing a fee for credit cards, Marylanders may want to get used to paying with a debit card — or cash.