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 2023, 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.
What Surcharging is Not
Surcharging is often confused with “cash discounting.” Cash discounting happens when the merchant displays prices for products or services but then offers cash-paying customers a discount at the point of sale. To implement cash discounting, the card brands require that the price posted in the store is the credit card price and a discount is provided at the register or when the credit card is processed. If any type of fee is added at the register, than that is automatically a surcharge, no matter what the fee is called. Cash discounting works for those merchants that are willing to increase their price for goods and services in order to increase their bottom line. To increase revenue without increasing prices across the board, NTC Texas offers a surcharging solution.
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. A compliant merchant service provider will be able to determine the type of card based on the card number during processing. Debit vs credit can no longer be determined by simply looking at the front of the card or the first 6 number on the 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 two card brand compliant surcharging solutions that ensures businesses surcharging transactions are 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. Whether processing with a terminal, online, or on a smartphone, as a business owner, it is not necessary to completely absorb the cost of credit card acceptance.
The Bottom Line
The result is full legal compliance and zero processing fees for credit cards. 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.