Friday, August 25, 2023
The new law applies to all sales channels. So, for example, oral notices are required for phone sales completed with credit cards.
The definition of a surcharge, as written into the new law, is "any additional amount imposed by a seller at the time of a credit card transaction that increases the charge to a customer for the use of a credit card."
Jonathan Razi, creator of the surcharging platform CardX, a Stax company, worked with New Jersey lawmakers drafting the legislation. He said "the law creates clear standards for any merchant to offset their cost of processing credit cards."
Razi said that surcharging has attracted interest from lawmakers looking for ways to relieve financial pressures on merchants and to better protect consumers.
The consumer experience with surcharging can be vastly different from one business to another, Razi noted. The New York Times recently reported that small businesses are applying "cash discounts" or "convenience fees" of 3.8 percent, 4 percent and even 5 percent. "As you know, this is well in excess of what it permitted by the card brands," Razi said.
In April, Visa lowered from 4 percent to 3 percent the maximum surcharge that can be assessed a customer paying with a Visa-branded credit card. Mastercard's cap remains at 4 percent, for now.
Two features of the New Jersey law closely align with a law enacted by Colorado. In 2021, Colorado became the 48th state to allow credit card surcharging. Connecticut, Massachusetts and Puerto Rico are the only remaining jurisdictions where merchants cannot surcharge credit card payments.
That Colorado law caps surcharges at 2 percent, or the actual amount paid by the merchant to their payment processor. That law also established disclosure requirements similar to those enacted in New Jersey.
"As the post-pandemic economy continues to grow and evolve, we too must adapt to best safeguard New Jersey consumers against unfair practices," Governor Phil Murphy said in signing the bill into law. "[N]ow consumers will learn about credit card surcharges before they complete a transaction, which will help them make an informed decision about choosing their method of payment," said Assemblyman Paul Moriarty, a Democrat who co-sponsored the bill.
The legislation had bipartisan support in the New Jersey legislature, as well as the support of numerous business groups. The New Jersey Law Journal, in an editorial, put its support this way: "Passing along surcharges is a fact of everyday life, but businesses should not opportunistically be able to profit from the passed along surcharge."
"My perspective has always been that, as surcharging matures in the market, we will see more structure created around the surcharging option, and New Jersey is one example of that," Razi stated in an email exchange.
As surcharging takes hold with more businesses in more states, Razi sees a growing trend toward "prescriptive" laws around surcharging, just like Colorado and New Jersey.
With more structure around surcharging here in the United States, Razi suggested the country could follow a trajectory similar to the one taken in Australia. That country went from prohibiting surcharging outright, to allowing it with a "very permissive" regulatory structure, "and ultimately introducing rules that ensure surcharging is done the right way," Razi said. 
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