How Not To Get Ripped Off When Using Your Debit Card

Some consumers are unaware that the laws changed this year (January 27, 2013) the rules by which merchants can pass on transaction fees for credit cards changed. You may have noticed in the past signage at the cash register that informs you that they charge a fee for using credit/charge cards. What you may not be aware of is that merchants may not pass on a transaction fee or surcharge when you are using a debit card.

MasterCard, one of the largest issuers of debit/check and credit/charge cards, has this notice posted on its website:

Pursuant to a settlement of the U.S. merchant class litigation, MasterCard will modify certain rules and business practices to permit U.S. merchants to apply an extra checkout fee, also known as a surcharge, to customers who pay with MasterCard-branded credit cards. The rule change permitting such surcharging will go into effect on January 27, 2013. These fees are not allowed on Debit MasterCard or MasterCard prepaid cards.

How can they know if I’m using a debit card? Generally speaking, if you punch in a PIN number at the KIOSK, you’re using your debit card function. If you offer a signature or it’s on offline purchase, you can be charged as much as four percent of the purchase price. An offline purchase is a situation in which you’re calling and giving them your debit card number and you’re neither signing for it or using a PIN number. Subsequently, it’s really important to know how your purchase is being put through.

Certain states (10) have made passed laws regulating the ability of merchants to legally charge a surcharge when purchases are made with credit cards.  Those states are:

  • California
  • Colorado
  • Connecticut
  • Florida
  • Kansas
  • Maine
  • Massachusetts
  • New York
  • Oklahoma
  • Texas

Merchants are not permitted to charge a surcharge when you are paying by debit card.

Unfortunately, there are many merchants who continue to charge surcharges on debit card purchases. They reason that it’s a cost to them, therefore they are entitled to pass it on.  I have fought this battle with local merchants in my area multiple times now by first speaking to them about the law. If they are unrelenting, you can call customer service for your card issuer and make a complaint against the merchant. You can also file a complaint with the consumer protections division of your State Attorney General or the new Consumer Protection Credit Bureau.

What I recommend is that you not let a single instance of debit card surcharging go unchallenged. I’ve successfully gotten a merchant near me to cease that practice. It took a year and several complaints to accomplish it, but they have ceased to charge surcharges on debit cards.

I did see some reporting where some experts have suggested that debit cards may have fewer protections (liability/theft/fraud) than credit cards, but I don’t see that reflected in my card agreement. It’s quite possible that as financial institutions are looking at how to absorb the reduced fees that they receive for debit card transactions, there may be changes coming. If you have questions about the differences between protections for using your card as a debit/check card versus a charge/credit card, I’d recommend you contact your issuer to get those specifics nailed down.


About Liberal America writer Godiva de Maus

B.S. Political Science/International Relations
Spanish language-Business emphasis
Spent a year and half living in off-grid household on solar power
Disabled American and survivor of the pre ACA healthcare system and a proud recipient of the “very tough to kill” award ™
Living in the rain forests of Washington State

Author: The Blue Route

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