Credit Card Surcharging Becomes More Common as Laws are Amended

Until very recently, credit card surcharging was virtually illegal in many places throughout the United States. But merchants pushed back, engaging in years-long court battles. They defended their right to use surcharges as a way to cover credit card processing fees. They also petitioned the courts to protect their constitutional right to transparently disclose credit card fees to their customers, while offering them alternative fee-free payment options.

Now that some key court cases have been settled, there are only half a dozen states that still maintain the surcharge ban. Those are Colorado, Oklahoma, Kansas, Connecticut, Maine, and Massachusetts. With legal momentum now favoring merchants and consumers, those states will likely find it more difficult to defend their no-surcharging policies. Some leading industry experts now predict that surcharging bans will soon be lifted in all the remaining states, perhaps by the end of 2019.

Hidden Price Inflation

One of the biggest adverse outcomes from high merchant fees is overall retail price inflation. Customers wind up paying extra for goods and services, because merchants are compelled to raise their prices to cover their fees. Neither merchants nor customers benefit, but both lose.  That prompted small business owners to file lawsuits, arguing that the policy of no surcharging was a violation of their 1st Amendment rights. Courts agreed, saying that it basically prevented merchants from exercising free speech and clearly informing their customers of the added costs and their other payment options. In January of 2019, New York became the latest of the big states to lift a ban on surcharging, joining California, Texas, and Florida. Merchant plaintiffs and the state of New York agreed to settle a case against credit card processing companies, thus ending a multiyear legal fight.

Challenging the Status Quo

The steep merchant fees that credit card processing companies charge are a vital revenue source for them, which is why they have fought so hard against surcharging. Those processing fees, which add up to many billions of dollars each year, help to finance rewards credit card program incentives, for example. Rewards programs generate major revenue for card issuers and attract a greater market share of cardholders. But with landmark court decisions paving the way for legal surcharging, the status quo was been severely challenged. Merchants are now searching for ways to implement surcharging, without violating strict credit card processing company contractual rules.

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Plug-In Solutions

That demand gave rise to Zero-Cost Credit, a plug-in payment processing software that incorporates a truly leveled playing field for businesses and their customers. The way it works is that any purchase made with a credit card (as opposed to debit) automatically calculates and passes along card fees to the customer, at the point of sale. The merchant retains 100 percent of the sales proceeds. Most importantly, the software does so without adding any undisclosed, additional, or otherwise non-compliant or illegal fees at the point of sale. CardX also supplies industry-compliant signage merchants can display, which notifies consumers of their payment options. If they want to avoid surcharging costs, for instance, they can pay with a debit card or cash instead of a credit card. The tide has shifted, and now that surcharging is more common it represents a win-win for consumers and merchants alike.