Is It Legal? Adding Surcharges to Credit Card Transactions

The practice of surcharging, where the merchant passes the credit card processing fee along to the customer, is gaining a lot of momentum. But it also causes much confusion for businesses that want to make sure it is legal as well as fully compliant with the contractual rules and merchant agreements required by credit card processing companies like VISA. The following is a helpful summary of what merchants need to know to answer those important questions.

Yes, It’s Legal Almost Everywhere

In 2020, nearly all states do allow perfectly legal credit card surcharging. That follows court rulings that declared laws against surcharging unconstitutional. In January of 2019, New York lifted its ban on surcharging, joining the other leading states of California, Texas, and Florida. Once all of those courts ruled in favor of merchants, who complained that the bans on surcharging were unfair, a cascade of other states also removed their bans. Experts predict that surcharging will be legal, throughout the United States, by the end of 2020.

What Surcharging is Not

Surcharging is often confused with “cash discounting,” and cash discounting is NOT permitted by processing companies like VISA. Cash discounting happens when the merchant displays prices for products or services but then offers cash-paying customers a discount and refund at the point of sale. Surcharging is very different from that. A surcharge does not give a discounted price. Instead, it calculates the merchant’s credit card processing fee for the transaction and adds that fee to the amount charged to the customer. The posted and displayed price of merchandise or services remains the same and is paid in full.

The Basic Rules

There are strict rules to follow for businesses that surcharge:

  • Legal surcharging means that a nominal charge exactly equal to the processing fee (and not a penny more or less) is added at the point of sale.
  • The surcharge amount needs to be clearly disclosed on the customer’s receipt as a separate line item.
  • Surcharges must never be applied to a debit card transactions, even when it is hard to tell the difference between debit and credit cards.
  • Visible surcharging signage is required, to inform consumers that the merchant uses surcharging and to explain what it is and the customer’s other payment options.
  • Customers can decide whether to use a credit card and pay the surcharge, or avoid it by paying with a debit card, cash, or other non-credit card way.

Following all the rules can get complicated, if it is done manually. Fortunately, simple plug-in software is available that reliably handles all those nuances, without slowing down the payment process.

The Easiest Compliance Solution

NTC Texas offers Zero Cost Credit, Powered by CardX,  a solution that ensures businesses every surcharging transaction is 100 percent compliant. When the software detects a credit card, it automatically passes the processing fee along to the customer or buyer, in a way that incorporates full legal disclosure. That includes printing it on the receipt as required. Merchants are also provided with legally compliant signage, so they don’t have to create their own. CardX is a completely seamless and easy solution requiring no special technical know-how or IT infrastructure.

The Bottom Line

The result is full legal compliance and zero processing fees. That can add two, three, or even four percent to revenues, by instantly and automatically recouping all credit card processing fees. That has proven to be a game-changing solution for businesses, universities, nonprofits, or government agencies of all sizes.