Retailers may add surcharge in credit card transactions

Retailers in 40 U.S. states can now charge up to 4 percent extra when consumers pay for goods and services with a credit card.

These so-called "checkout fees" went into effect January 27, and do not apply to debit card payments. The fees are illegal in California, New York, Texas and seven other states.

It is up to individual businesses to decide whether or not to add the fee. They also need to disclose it to consumers.

The surcharge is the result of the biggest anti-trust settlement in U.S. history. In 2005, a group of merchants claimed that MasterCard, Visa, and nine other companies including JP Morgan Chase & Co conspired to fix the fees that stores pay to accept credit card purchases.

After years of negotiations the case, which was in the U.S. District Court for the Eastern District of New York, settled. The credit card companies and banks agreed to pay $6 billion to the merchants who sued.

As part of the settlement, the merchants are allowed to charge customers a fee equal to the cost of accepting cards, typically 1.5 percent to 3 percent of the purchase price.

"While it is legal to charge extra, there are still limitations," said Kathy Li, the San Francisco director of Consumer Action, a consumer advocacy agency. "For example, what kind of cards can be charged? What cards can't be charged?"

To avoid the surcharge, consumers can pay with cash or debit cards. And when shopping online, "there's always PayPal or other electronic payment options that can't charge extra," said Li.

(Reporting By Atossa Araxia Abrahamian; Editing by Jilian Mincer, Bernard Orr)