Posted in Customer Support.

Image of money with wings

Surcharging – part deux

We like to revisit this topic from time to time as rules sometimes change, plus we like to educate new merchants on industry practices. We are often asked about surcharging, which is the practice of passing on the processing fees to customers. First, merchants are not allowed to surcharge for debit card sales – including prepaid cards – no exceptions! With regard to credit card sales, since a prior class action lawsuit against Visa/Mastercard in 2013, it is permissible in all but ten states (CA, CT, CO, FL, KS, ME, MA, NY, OK, and TX, where it’s illegal). It’s uncertain if states are enforcing these laws or what the penalties are for convictions (we are guessing that the most egregious offenders are forced to actually read their credit card processing agreement – may God have mercy on their attention spans). You can read about surcharge statues here, and below we’ve listed a few guidelines for merchants in the permissible 40 states:

  • Consumers must be informed that their credit card purchases will be surcharged.
  • The amount cannot exceed 4% of the sale.
  • The amount must be charged as a separate line item.
  • All cards must be surcharged, not just a particular brand. The dilemma is that American Express explicitly forbids surcharging.
  • The card brands (Visa/Mastercard) must be notified via the proper form.
  • Signage at all store entrances must be posted, or on their website.
  • When refunding a purchase, the surcharge fee must be included.

As you can see, merchants must actually go through hoops to “properly” surcharge customers for the credit card fees, but maybe it’s a good thing, as any discriminating customer would probably take their business elsewhere if faced with such a charge.