Thinking about surcharging your customers? Think Again.
As a result of the $7.9 billion dollar class action lawsuit, the card issuers, Visa and Master Card, have been forced to lift their restrictions against merchants charging a surcharge on top of a purchase to offset their credit card processing fees. While this may seem like good news for merchants who are considering passing on their processing fees to the cardholder via surcharge, there are some important things that need be addressed.
First of all, there are currently ten states in the union that have legislation making it illegal for merchants to charge cardholders a surcharge for a debit or credit card payment. These states are California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Additionally, there are 4 other states that have similar legislation pending including Illinois, Hawaii, Rhode Island and New Jersey. Others are also considering prohibition of the credit card processing surcharge. Due to this fact it is highly recommended that any merchant considering the surcharge on their credit card transaction contact their state government office to determine if it is in fact legal, otherwise you might be subject to some hefty fines.
Once you’ve done that you now have to abide by all of the criteria a merchant must follow in order to charge these additional credit card processing fees. To begin with, the surcharge cannot exceed 4% of your previous quarters processing fees as indicated on your merchant statements. Secondly, the merchant must have notifications of this surcharge at all points of entry to their establishment and at the point of sale. Finally, prior to implementing a credit card process surcharge, merchants must give Visa and Master Card 30 days advance notice.
One final point regarding this practice; Implementing a credit card processing surcharge might prompt a bad reaction from a valued client and result in lost business, especially if the merchant down the block is not charging one. Most large retailers are aware of this fact and simply incorporating the merchant fees into the pricing of their products as they have always done.