A credit card surcharge involves adding a fee to a customer’s purchase when they choose to pay with a credit card. While surcharging can help merchants offset the costs of credit card processing, it is subject to specific rules and regulations set by card networks and local laws. Here’s an outline of the general rules for surcharging, as well as state-specific exceptions:
General Rules for a credit card Surcharge:
- Disclosure: Merchants must clearly disclose the credit card surcharge fee at the point of sale (both in-store and online) and on the receipt. The disclosure should include the amount of the surcharge, a statement that it is a fee imposed by the merchant, and an explanation that the surcharge does not exceed the merchant’s cost of processing.
- Credit Card Surcharge Cap: The surcharge amount cannot exceed the merchant’s cost of processing the credit card transaction, which typically ranges from 1% to 4%. In addition, the surcharge must not surpass the maximum cap set by the card networks (e.g., 4% for Visa and Mastercard).
- Card Types: Merchants are allowed to apply surcharges to credit card transactions only, not to debit or prepaid card transactions.
- Brand Consistency: If a merchant decides to surcharge one card brand (e.g., Visa), they must also apply surcharges to all other accepted card brands (e.g., Mastercard, American Express) in a consistent manner.
- Notification: Merchants must notify card networks (e.g., Visa, Mastercard) and their acquirer at least 30 days before they start surcharging.
State-Specific Exceptions:
As of September 2021, ten U.S. states have laws prohibiting or restricting surcharging. These states are:
- California
- Colorado
- Connecticut
- Florida
- Kansas
- Maine
- Massachusetts
- New York
- Oklahoma
- Texas
The specific rules and restrictions vary by state. For example:
- In California, a credit card surcharge is prohibited under the state’s statutes. However, this prohibition has been challenged in courts, and the enforcement of the ban is currently uncertain.
- In Florida, a federal court ruled in 2015 that the state’s ban on surcharging was unconstitutional. Since then, Florida has not enforced the ban, allowing merchants to apply surcharges if they follow the general rules mentioned above.
- In New York, merchants are allowed to offer a cash discount, but they cannot impose a credit card surcharge. However, in 2021, the Supreme Court declined to hear a challenge to the state’s surcharge ban, leaving its future uncertain.
It’s essential for merchants to understand the rules and regulations governing surcharging in their specific location to ensure compliance with both card network requirements and state laws. Non-compliance may result in fines, penalties, or even termination of the merchant’s ability to accept credit card payments.
- Colorado: The state law prohibits merchants from imposing a surcharge on credit card transactions. However, merchants can offer discounts for payments made with cash or other forms of payment not involving a credit card.
- Connecticut: Surcharging is prohibited in Connecticut, as stated in the state’s consumer protection laws. Merchants are not allowed to impose a surcharge or additional fee for using a credit card but can offer cash discounts.
- Kansas: According to the Kansas statutes, merchants are not allowed to impose a credit card surcharge. However, they can offer discounts for payments made by cash, check, or other means not involving a credit card.
- Maine: The state of Maine prohibits surcharging on credit card transactions. The law allows merchants to offer discounts for cash or other payment methods but restricts them from adding a surcharge to credit card payments.
- Massachusetts: In Massachusetts, surcharging is prohibited. Merchants are not allowed to impose a surcharge or any additional fee for customers using a credit card for payment. However, they can offer discounts for cash payments.
- Oklahoma: Oklahoma law prohibits merchants from adding a surcharge or additional fee to credit card transactions. It is important to note that merchants can still offer cash discounts to customers who prefer not to use credit cards.
- Texas: Texas law prohibits surcharging on credit card transactions, as stated in the state’s finance code. Merchants are not allowed to impose a surcharge for customers paying with a credit card but can offer discounts for other forms of payment, such as cash or check.
It is important for merchants operating in these states to be aware of the specific surcharging rules and regulations to ensure compliance with both state laws and card network requirements. Please note that laws and regulations may change, and merchants should always consult with legal counsel or stay informed about current legislation to ensure compliance.
