I've heard conflicting things about surcharging card transactions. Apparently, it's legal now, but word doesn't seem to have filtered down to Main Street merchants. Is it really legal, and how feasible is it?
Tom Lydon, Merchant Level Salesperson
The major card brands banned imposing surcharges on card payments until 2013, when they revised their rules to allow the practice. However, surcharging of credit card payments was illegal in 11 U.S. states until 2017, when the Supreme Court struck down a New York anti-surcharging law. Surcharging debit card payments, however, remains illegal across the board.
Now, the only remaining states whose anti-surcharge laws impede adoption are Kansas, Colorado, Massachusetts and Connecticut. However, efforts to enable surcharging in those states are ongoing, and it is generally accepted that, given the Supreme Court's 2017 decision, those states will ultimately allow the practice, too. Legalities aside, however, surcharging is not necessarily the right solution for all merchants who want relief from interchange fees. This is so for a couple of reasons. Many retailers, especially small and midsize businesses, fear consumers will object to the practice and take their business to merchants who don't surcharge. Others fear that if surcharging gains wide acceptance, it will signal to the card brands and issuing banks that they can increase fees even more.
Surcharging is, however, taking hold among merchants who have not previously accepted credit cards because they didn't want to pay the related fees. It is also gaining steam in B2B payments where parties hit with surcharging fees are unlikely to bolt because switching to another service or materials provider would disrupt the supply chain. And some philanthropic nonprofits can make a good case for passing on the fee to donors because more money will then be going toward their cause.
Whether surcharging will eventually become palatable to most consumers is an open question, but there are service providers who can make the process seamless for merchants who choose to try it.
Tell us about your experiences with surcharging, cash discounting or other current industry developments at email@example.com.
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