Visa changes surcharge rules

Visa decreed that beginning April 15, 2023, merchants cannot assess surcharges in excess of 3 percent on credit card payments. The news was coupled with a change in registration procedures for surcharging. Now, instead of notifying Visa directly, merchants planning to surcharge will need to notify their acquirer at least 30 days prior to the startup of surcharging.

"I think Visa takes this issue very seriously, and it has made its opinion clear," said James Shepherd, president of CCSales Pro.

Not only does the new cap seriously impact residuals on surcharging accounts, but it could also have consequences for other pricing models that shift processing costs to cardholders. Any pricing model that adds a line-item charge—as is the case with many cash discount programs, for example—could be construed as surcharging, Shepherd warned.

Visa reportedly has dispatched an army of secret shoppers to identify merchants that are adding surcharges to tickets in violation of its rules and fining those merchants' acquirers.

Shepherd's advice: go with dual pricing, where merchants can charge a cash or card price.

Surcharging and cash discounting irk card brands

Visa and Mastercard have never liked the idea of surcharging credit card payments, or for that matter, offering discounts for cash in lieu of card payments. But they relented as part of a 2013 legal settlement with retailers, allowing surcharges on credit cards only, provided surcharges are allowed by state law. Only Colorado, Connecticut and Massachusetts currently have laws on the book forbidding surcharging.

Cash discounting is expressly permitted under the Durbin Amendment to the Dodd-Frank Act, but also is limited to credit card payments.

Both surcharging and cash discounting are offered to merchants as a way to avoid rising card processing costs

Neither method of charging for card payments had much traction until a few years ago. Surcharging got a lift following a 2017 U.S. Supreme Court decision reversing a lower court ruling that upheld a New York law banning surcharging. Since then, a few companies have come to market with solutions that support compliant surcharging, including CardX, which last year was acquired by Stax Payments.

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