Attention all shoppers, you may want to rethink using a credit card instead of cash when purchasing your goods.
Over the weekend, merchants who accept MasterCard and Visa were able to start adding a surcharge onto your bill.
The new fees stem from a multi-billion dollar settlement announced in July between credit card issuers and millions of merchants.
Visa (V, Fortune 500), MasterCard (MA, Fortune 500) and nine major banks agreed to a $7.25 billion deal to settle charges that they were fixing credit card processing fees. As part of the settlement, credit card issuers said they would reduce these "swipe fees," -- fees paid by merchants to issuers when cards are used -- but only for eight months.
The surcharge is supposed to equal the actual cost of processing the credit card transaction, which is typically 1.5 to 3 percent. Under the agreement, the fee is capped at 4 percent, but it can vary based on the type of card.
This fee doesn't apply to purchases made using debit cards. And it will still be illegal to charge the new fee in 10 states, including New York, California and Texas.
Many big players in the retail industry have been up in arms about the settlement. Stores from the nation's largest retailer down to small businesses have lamented the agreement, claiming that it transferred the wrongdoings of credit card issuers to the consumer.
Wal-Mart (WMT, Fortune 500), Macy's (M, Fortune 500), JCPenney (JCP, Fortune 500), Limited Brands (LTD, Fortune 500), Gap Inc (GPS, Fortune 500). and The Neiman Marcus Group were among those who joined the NRF in claiming that "raising consumer prices by adding an 'interchange tax' is no remedy for Visa's and MasterCard's continuing monopoly abuse."
In a separate statement, Wal-Mart said that it would cost consumers "tens of billions of dollars each year." Target (TGT, Fortune 500) called the agreement "bad for both retailers and consumers."
Merchants have a choice as to whether to implement the surcharge, but it poses quite a dilemma for them: Either get stuck footing the bill for the swipe fees, or risk transferring the cost to customers in an already competitive environment.
Last summer, Target said it had no interest in charging customers who use credit cards more "in order to allow Visa and MasterCard to continue charging unfair fees."
Smaller merchants echoed these concerns over the deal, saying it doesn't go far enough.
MasterCard said it doesn't expect most merchants to put the surcharge into effect, since stores won't want to drive away business.