Card Transaction Surcharges- What you Need to Know

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Nobody reacts well to the word “surcharge.” It implies paying more for something to cover someone else’s expenses. But some merchants believe these fees are necessary as a way to recover all or part of the transaction fee from a card purchase.

The situation is further complicated by different terminology (the surcharge is called a “convenience fee” in some industries) and by varying state laws. Since 2013, VISA has allowed merchants to add surcharges in all but 10 states, but the legal settlement that established that precedent was recently overturned by a federal appeals court.

If and until new legislation is passed, here is some information about surcharges that may be helpful.

According to VISA Core Rules and VISA Product and Service Rules, U.S. merchants cannot impose a surcharge in circumstances where it is prohibited by other card brands. Surcharges are not allowed on debit cards and prepaid cards, including gift cards.

Notification of the surcharge and the exact amount or percentage must be made at the retailers’ point of entry and at the point of sale, and the amount must appear on the transaction receipt. For purchases not made in-store, such as via telephone or website, cardholders must be informed of the surcharge and have an opportunity to cancel the purchase.

The 10 states that do not allow surcharging under any circumstances are:

California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.

Straight Answers From Cliq

Sadly, some of the confusion around surcharges emanates from less than scrupulous point of sale device providers. Some of these companies try to gain a competitive edge by telling retailers that surcharging is allowed on all card types, and that some surcharges can only be applied by using their “patented” system. They also charge retailers more – perhaps as much as $150 per terminal per month – to access this bogus privilege.

Retailers that are taken in by these schemes not only wind up overcharging customers and paying much more than they should for merchant processing services, they are also breaking the law.

This is why it is important to choose a merchant services provider like Cliq that will give you straight answers and make certain that your business practices in this area are in accordance with surcharge regulations as they exist now.

Since the possibility exists that laws will change, or that VISA and other card providers may withdraw their surcharging practices altogether (as American Express already does), some merchants have abandoned surcharging services now, figuring it may ultimately cost them more than what they’ll get back.

Talk to a Cliq representative about this issue if you have any additional questions.