The yet to be approved $7.3 billion credit card swipe fee settlement against Visa, MasterCard and some of the nation’s largest banks may actually present small business owners with less flexibility than was assumed, according to an article in this week’s New York Times. While many merchants said when the proposed deal was announced that they were skeptical it would change much of anything (see our July blog post on the subject), there were a number of others who said they would welcome the opportunity for the first time ever to charge their customers a small fee for the luxury of using credit cards.

Unfortunately, their having that ability may be more about what looks good on paper and less about what is actually a workable scenario on the ground. Seems there’s a bit of a “Catch-22” provision in the settlement that may complicate things.

So what’s THAT all about? It goes something like this…

According to the agreement, which is slated for court approval in mid-2013, a business owner that adds a surcharge to a Visa or MasterCard transaction would also be required to add one to any American Express transaction, if they also accept that card, and it is estimated that roughly half of them do. American Express, however, has its own rule, and it says that businesses that accept their card must treat all forms of electronic payment the same, including debit cards. But, guess what? Both Visa and MasterCard actually prohibit surcharges on debit cards. So where does that leave a small business owner in terms of options? Limited for sure, and at the very least confused.

Given that debit is the preferred method of payment by many merchants today and that the rule more or less dictates that levying a surcharge on American Express customers means levying one on debit card users as well, let’s just say the whole surcharge idea may be more trouble than it’s worth. As for the credit card companies, this new wrinkle is bound to prompt a whole other round of debate as to how the proposed settlement will affect what is supposed to be a competitive and fair marketplace. And when it comes to the more than 7 million small business merchants who banded together to file the lawsuit in the first place some seven years ago, one has to wonder if all this talk about “settling” anything will actually benefit them or if it’s largely for show.

Read the New York Times article for additional information. It’s a low investment of your time.