Surcharge Fees
Surcharge Fees
Some countries or states regulate surcharge fees and have legal restrictions or requirements relating to them. For example, merchants in the United States are permitted to charge surcharges on credit card transactions, but they must comply with state laws and regulations imposed by the card networks. Australia has regulated surcharging since 2016, and businesses are only permitted to charge customers the actual cost of accepting a particular payment method.
It is important to recognize that surcharges can be controversial since they can be viewed as a way for businesses to shift their costs to consumers. Additionally, some customers may be discouraged from purchasing a product or service if they are charged additional fees. The company’s surcharging policies should be carefully considered and communicated to its customers clearly as a result.
Card network surcharge fees are fees that merchants can charge to customers who use certain types of credit or debit cards. Here’s a summary of the rules governing surcharge fees for each of the major card networks.
Visa Surcharge Fee Rules
Visa rules allow merchants to impose surcharges on customers who pay with their credit cards, but there are certain conditions that must be met. Here are some of the main rules:
- Merchants are allowed to impose surcharges on Visa credit cards, but not on Visa debit or prepaid cards.
- The surcharge cannot exceed the merchant’s cost of acceptance, which is typically around 2% of the transaction amount.
- Merchants must disclose the surcharge amount on receipts and at the point of sale.
It’s worth noting that some U.S. states (As of March 2023), including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas, have laws that prohibit merchants from imposing credit card surcharges. However, merchants are still allowed to offer discounts for paying with cash, check, or debit card.
Visa also monitors merchant activity and may take action against merchants who violate their surcharging rules. This can include terminating their ability to accept Visa cards.
Discover Surcharge Fee Rules:
- Merchants are allowed to impose surcharges on Discover credit cards, but not on Discover debit or prepaid cards.
- The surcharge cannot exceed the merchant’s cost of acceptance, which is typically around 2% of the transaction amount.
- Merchants must disclose the surcharge amount on receipts and at the point of sale.
Rules for Mastercard Surcharging
- Merchants are allowed to impose surcharges on MasterCard credit cards, but not on MasterCard debit or prepaid cards.
- The surcharge cannot exceed the merchant’s cost of acceptance, which is typically around 2% of the transaction amount.
- Merchants must disclose the surcharge amount on receipts and at the point of sale.
- Merchants must apply surcharges consistently across all payment methods and cannot selectively apply them to MasterCard transactions only.
Merchants in certain U.S. states are prohibited from imposing surcharge fees on credit card transactions, including MasterCard transactions. As of March 2023, these states include California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. However, merchants in these states can offer discounts to customers who pay with cash or another form of payment.
American Express Surcharge Fee Rules (Amex)
American Express has rules regarding surcharge fees for merchants that accept their cards. According to their regulations, merchants are generally not allowed to impose a surcharge on customers who pay with an American Express card. However, there are some exceptions:
- Merchants are allowed to impose surcharges on American Express credit cards and charge cards.
- The surcharge cannot exceed the merchant’s cost of acceptance, which is typically around 3.5% of the transaction amount.
- Merchants must disclose the surcharge amount on receipts and at the point of sale.
It is important to note that American Express monitors merchant activity and may take action against merchants who violate their surcharge fee rules. This can include terminating their ability to accept American Express cards.
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Disclaimer: All card network rules are as of April 2023.