Surcharging Can be Risky, if Not Done Properly
A surcharge is an additional charge a merchant places on top of a credit card purchase to help cover the merchant’s credit card processing fees.
Some states have laws prohibiting this. As recently as 2016, that list included California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. In some cases, merchants may offer a cash discount instead. In other cases, that isn’t allowed either.
In 2017, New York state’s no-surcharge law was undercut by the US Supreme Court, making surcharges essentially legal in that state and many states with similar laws. But even then, merchants have specific guidelines requiring signage that explains the surcharge, guidelines dictating minimum purchases, and guidelines for the maximum surcharge percentage.
A merchant who violates these rules can potentially have its merchant account locked, and be prohibited from taking credit card payments going forward. Thus, it’s crucial that you familiarize yourself with your local laws, and comply fully.
For reference, here are Visa’s guidelines for merchants.
In addition to potential legal roadblocks, many consumers have a negative view of surcharging. But for some merchants in states that allow it, the benefit of recuperating one’s merchant service fees through surcharging can outweigh the bad publicity.
This page exists for informational purposes only and does not constitute legal advice. If you are a consumer or a merchant and have questions regarding credit card surcharges, please contact an attorney or your state attorney general.
About Verisave: we are expert merchant account auditors and consultants. We are NOT a credit card processor.