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Skip to contentSkip to site index Search & Section Navigation Section Navigation SEARCH Business SUBSCRIBE FOR $1/WEEKLog in Saturday, February 10, 2024 Today’s Paper SUBSCRIBE FOR $1/WEEK Business|CREDIT CARD SURCHARGE BAN ENDS https://www.nytimes.com/1984/02/27/business/credit-card-surcharge-ban-ends.html * Share full articleShare free access * * Advertisement SKIP ADVERTISEMENT You have been granted access, use your keyboard to continue reading. Supported by SKIP ADVERTISEMENT CREDIT CARD SURCHARGE BAN ENDS * Share full articleShare free access * * * Read in app By Stephen Engelberg * Feb. 27, 1984 Credit...The New York Times Archives See the article in its original context from February 27, 1984, Section D, Page 1Buy Reprints New York Times subscribers* enjoy full access to TimesMachine—view over 150 years of New York Times journalism, as it originally appeared. Subscribe *Does not include Crossword-only or Cooking-only subscribers. About the Archive This is a digitized version of an article from The Times’s print archive, before the start of online publication in 1996. To preserve these articles as they originally appeared, The Times does not alter, edit or update them. Occasionally the digitization process introduces transcription errors or other problems; we are continuing to work to improve these archived versions. A law barring merchants from charging extra for purchases made with credit cards is expiring Monday, opening the way for retailers to impose surcharges against the more than 55 million American households that use credit cards. But spokesmen for credit card companies predicted that few merchants would demand the payments because Congress is likely to approve a short extension of the ban within a few days. Dan Crippen, an aide to Howard H. Baker Jr., the Senate majority leader, said the Senate would probably schedule floor action this week on a measure that would extend the law, which expires at 12:01 A.M. Monday, through May 15. A similar bill, providing a six-month extension, passed the House last year. The long-term prospects for continuing the ban, however, are uncertain. Key Senators and the Federal Reserve Board have said they favor allowing surcharges, provided they are limited to 5 percent of the purchase price and are properly disclosed. Advertisement SKIP ADVERTISEMENT 'Part of Americana' Both sides of the debate in Congress have cloaked themselves in the mantle of consumerism. ''Credit cards have become part of Americana,'' said Senator Alphonse D'Amato, Republican of New York, who is a member of the Banking Committee. ''There will be nothing gained if we allow surcharges. It will bring about a higher cost with no added value. The consumers of America will wind up spending at least $10 billion for no value.'' But Senator Christopher Dodd, a Democrat of Connecticut who is also on the Banking Committee, agrees with the arguments of the Federal Reserve. He contends that the present system forces cash customers to subsidize credit customers because retailers raise prices on all transactions to recoup the fees charged them by card companies. ''We've extended this law for too long,'' said Mr. Dodd. Lobbying Effort The debate on the law has also inspired a fierce lobbying campaign by the credit card companies, which fear that surcharges could make their product less popular. ''We've been opposing surcharges for eight years,'' said Hugh Smith, senior vice president of Shearson/ American Express. ''It could potentially hurt the image of our cards with a few customers.'' Under the current law, retailers may offer discounts of any size for cash transactions. Such unlimited discounts may continue once the law expires. Mr. Smith said that consumers do not write angry letters to American Express about such discounts, ''but they are quick to complain to us about a surcharge. We're very sensitive about that.'' Advertisement SKIP ADVERTISEMENT According to a recent study by the Federal Reserve, cash discounts are offered by more than 25 percent of the nation's gasoline stations, but only by 6 percent of the remaining retail merchants. A House aide said that one explanation for the relative unpopularity of cash discounts is that retailers, aware that surcharges on credit purchases are illegal, have erroneously assumed that discounts are not permitted. The Cost to Consumers The Fed study found that credit card companies charge an average of 3.1 percent to merchants for each credit transaction. Some of this is absorbed by the businesses and the rest - between 0.5 to 1.25 percent of the purchase price - is passed on to the consumer. The Senate Banking Committee and the Fed favor a proposal under which both surcharges and discounts would be limited to 5 percent. The House has shown little inclination to overturn the ban on surcharges. The chairman of the House Subcommittee on Consumer Affairs and Coinage, Representative Frank Annunzio, Democrat of Illinois, said he favors continuation of cash discounts coupled with a permanent prohibition against surcharges. Advertisement SKIP ADVERTISEMENT ''Those people who are supporting a surcharge are doing an irreparable harm to the consumers and to the economy of this country,'' he said. ''There isn't anything in this country which isn't bought with a credit card. We're a credit card society and we're talking about 600 million cards out there.'' Intense Protests Predicted Mr. Annunzio said that if surcharges were permitted, it would spur public protests as intense as those that accompanied plans for tax withholding on interest income. That proposal was killed by Congress after members were deluged with millions of postcards and letters. Several consumer groups, who usually are allied with Mr. Annunzio, have broken with him on the issue of surcharges. ''We're talking about billions of dollars in subsidy that cash customers are paying,'' said David Greenberg, legislative director of the Consumer Federation of America. ''If I buy something for $100 on credit, when the merchant sends in his slip to the card company, he doesn't get $100. He gets $96 or $97. The merchant has to make that up, and the way he does it is by adding to everybody's price.'' Roughly 70 percent of American consumers use credit cards; the remainder pay by check or cash, Mr. Greenberg said. ''That remaining 30 percent is important,'' he said. ''A lot of them are people who are too poor to afford credit.'' A version of this article appears in print on Feb. 27, 1984, Section D, Page 1 of the National edition with the headline: CREDIT CARD SURCHARGE BAN ENDS. Order Reprints | Today’s Paper | Subscribe * Share full articleShare free access * * * Read in app Advertisement SKIP ADVERTISEMENT Enjoy unlimited access to all of The Times. 6-month Welcome Offer original price: $6.25sale price: $1/week Learn more SITE INDEX SITE INFORMATION NAVIGATION * © 2024 The New York Times Company * NYTCo * Contact Us * Accessibility * Work with us * Advertise * T Brand Studio * Your Ad Choices * Privacy Policy * Terms of Service * Terms of Sale * Site Map * Canada * International * Help * Subscriptions