Am I allowed to Surcharge, or pass my credit card costs onto my customers?
Are you allowed to pass credit-card processing costs on to your customers? It depends!
Technically, you are allowed to surcharge your customers for credit card transactions, but there are several specific restrictions you need to be aware of:
- There are 10 states which actively prohibit this practice by law. These laws were created with the intention of protecting consumers, and stopping merchants from surcharging their purchases by favoring a specific payment type. The 10 states which it’s illegal to surcharge in are:
- New York
- You must clearly post your surcharging so that customers can see it. This is required per Visa/MC regulations. Technically it’s required that you post the surcharge on each receipt, in store, and online.
- You may not surcharge based on the specific card type. For example – you can’t surcharge 1% for Mastercard but 2% for Visa. It’s all or nothing, and has to applied indiscriminately.
- You can only surcharge credit transactions. You may NOT surcharge for debit or prepaid cards.
- You can only surcharge US transactions. International transactions must be exempt.
Both Visa and MC have some great details about their programs:
As you can see, there are a lot of restrictions to imposing surcharges. With that in mind, most retailers opt not to bother. They feel that the potential alienation of a customer, combined with having to post all of these signs may not be worth it. But, it’s each merchant’s choice to engage in this practice or not.
Convenience Fees, however, are allowed in all states. This is a flat or fixed fee that can be assessed in a card-not-present environment that is a bona fide convenience, which is unusual to the merchant’s typical payment form. For example, if you normally only accept checks, but are offering the convenience of accepting a credit card payment, then charging a separate fee is allowed. Here are the guidelines:
- The fee must be a fixed dollar amount regardless of the amount of the sale.
- Fee cannot be a percentage of the sale (that would constitute a surcharge fee).
- Fee must be included in the total sale amount.
- Fee must be disclosed prior to the sale.
- Fee cannot be assessed on a recurring billing charge.
- Fee cannot be applied to another form of payment.
- To confirm, fees cannot be assessed in a card-present environment.
The caveat here is that e-commerce merchants, whose primary payment method is already via credit cards, cannot add a convenience fee – the exceptions being government agencies, schools, and colleges.