New Credit Card Surcharge and How it Affects Your Business

Posted by on February 4, 2013 in News [ 0 Comments ]

credit card surchargeAs of January 27th, 2013, retailers may now charge their customers an additional fee for paying for their purchases with a credit card. What is this new fee, and how does it affect your business?

The changes to how retailers handle credit card processing fees came about as a result of a July 2012 anti-trust case. It was brought on by roughly 7 million retailers against Visa, MasterCard, JPMorgan, Bank of America, and other banks.

Retailers contended that the credit card companies and banks were conspiring to keep credit card processing fees high. The court ruled in their favor, and the plaintiffs paid $7.25 billion to retailers as part of the settlement. Other elements of the settlement included:

  • Visa and MasterCard reduced merchants’ interchange fees – known as the “swipe fees” – for a period of eight months.
  • Starting on January 27, 2013, retailers were allowed to pass on the cost of the swipe fee to their customers as a surcharge or “checkout fee.”

Related: Get started with credit card processing today

What the Rules Are

Retailers can choose whether or not to apply the checkout fee to their customers’ purchases, but are not required to do so. Those retailers who choose to apply the credit card surcharge must post a sign on the door informing customers of the surcharge. They do not have to state the exact fee amount until checkout. Retailers are limited in several ways on how they apply the surcharge.

  • The fee does not apply to debit cards – only credit cards.
  • The surcharge is prohibited by law in 10 states: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Chain retailers are required by Visa and MasterCard to process credit cards the same way in every location. Therefore chains with storefronts in these states cannot charge the fee at any of their other stores, no matter where they are located.
  • American Express prohibits surcharge fees. Since retailers must handle all credit cards the same way, any retailer that accepts American Express cannot put a surcharge on any other cards they accept.
  • The charge cannot be more than what the network charges the retailer for the interchange fee, and the surcharge cannot be more than 4% of the purchase price.

Related: How You Can Use Credit Card Processing to Identify Consumer Trends

How This Affects Your Business

In all likelihood, your business will not be affected by the new surcharge. If your business is located, or has additional storefronts, in the 10 states that ban surcharges, your business will be unaffected. If you accept American Express cards, your business will be unaffected. If your business is not limited by these two factors, you can charge your customers the surcharge – if you choose to do so.

  • You have always had to financially account for the interchange fee, so you have already built the cost of that fee into your prices.
  • Your business is not being charged any additional fees for processing credit cards as a result of the settlement; the new rule simply allows you to pass the current processing costs on to your customer.
  • The surcharge varies depending on the customer’s card company and card type. Therefore a customer who pays with Visa may end up paying a different price for the same product than a customer paying with MasterCard.

Be aware of how this new ruling affects your business. If you choose to apply the surcharge, be sure that your POS system is able to apply the charge correctly to each type of credit card. Your business may face customer backlash in response to the new surcharge, so make sure you effectively communicate with your customers about how the fee works and your reasons for using it.

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