The good news for cardholders is that while credit card surcharges will soon be legal in every state except Connecticut, Maine, and Massachusetts, they won`t be implemented too often. Have you ever paid something with a credit card to be told that you would be charged a fee for using a card instead of cash? These fees are called credit card surcharges, and they`re more common than you might think. Retailers may decide to charge this fee to offset the credit card processing fees they pay. Convenience fees are a subset of credit card surcharges and are allowed in all states. However, the laws govern when a company can charge its customers fees and when it cannot. If you`re in a state where it`s illegal to apply additional charges on a customer`s bill and you find that a company is breaking the law, you can contact your state attorney general`s office to file a complaint. But if you`re in one of the other 45 states not listed above, this practice is legal and allowed. In some states, retailers can`t add extras or comfort fees. Here are the five states where it`s illegal: Colorado, Connecticut, Kansas, Maine, and Massachusetts. If the bill passes, it will be the 47th state to allow merchants to charge additional fees for card payment, and Colorado`s new law limits surcharges to 2% of the value of the transaction or the actual amount the merchant pays to the payment processor. The trader can choose the structure to use and is not limited to the lower of the two amounts.
On the other hand, visa and Mastercard rules limit top-up to the lower percentage of the merchant`s discount rate, which is 4%. The overlap of card branding rules and Colorado law could create an interesting situation where, for example, the merchant`s discount rate is 5%. Although such a 5% surcharge is allowed under Colorado law as an actual merchant discount fee, the card brand rules would still limit the fee to 4%. The Colorado House of Representatives and Senate recently voted to allow credit card surcharges in the state of Centennial. No surcharge can be applied to debit or prepaid debit transactions. This also applies if a cardholder chooses “credit” as an option when using their debit card. “A nationally consistent pricing model is important for CardX as a service provider, as many companies that do not yet accept cards or only allow card payments in limited contexts will offer card payment options once a top-up is available, and we believe regulatory clarity and consistency is a win for our customers, consumers and card issuers,” Tomko said via email. The main reason merchants add credit card surcharges is by dealing with high credit card processing costs. The maximum allowed surcharges cover the fees charged by your processor per transaction with money. Colorado`s new law prohibits adding fees to purchases made by debit card, gift card, cash, or check. Because all fees in Colorado are surcharges, this part of the law is more restrictive than the card stamp rules. For example, Visa allows you to charge convenience fees on debit cards.
In Colorado, all fees added to a debit card transaction are illegal. “Whether licensed or not, most retailers don`t charge a premium for using credit cards and most have no interest in doing so,” Buck said in email. “A top-up would defeat retailers` goal of convincing the card industry to reduce the exorbitant fees charged to merchants for processing credit card transactions.” The practice of always charging customers a fee for credit card payments, regardless of how the transaction takes place, is called a surcharge. These are currently banned in 10 states – Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. While it`s illegal for businesses to charge credit card surcharges in these states, there are two things to keep in mind. In Maine, government agencies may charge credit card surcharges. In addition, all states are allowed to offer discounts to avoid these fees. These include the five states mentioned above. Offering a discount can encourage more customers to pay in cash, and it can help both the business and the customer avoid additional charges. Colorado`s surtax law is part of the Consumer Credit Code, and any seller or owner who violates the markup provision is subject to liability as a creditor.
While the Consumer Credit Act contains a variety of remedies and liabilities, the most severe penalty is the possibility for creditors who intentionally break the law to be prosecuted for a criminal offence. Colorado law expressly limits the amount that merchants may charge customers in addition to an amount that does not exceed (1) 2% of the total cost to the customer for the sale transaction or (2) the merchant discount fee incurred by the merchant when processing the card transaction. The merchant is not limited to the amount of the lower supplement and is free to choose one of the two options. While most merchants are likely to charge an extra fee equal to the discount fee incurred by the merchant, the merchant will ultimately have to comply with any restrictions imposed under the card branding rules. Credit card convenience fees can only be charged if a merchant offers an alternative payment method that is different from the way they usually do business. This distinction is that the fees are applied to how the transaction is processed, not to the actual payment method. For the avoidance of doubt, a museum in New York is not allowed to charge a convenience fee at the ticket office if that`s how most people buy their tickets. However, if they launch a program that allows individuals to purchase tickets online by entering their credit card details, convenience fees may be added. Convenience fees are paid due to online payment and not specifically because the customer has used a credit card. Unfortunately, there is no research available on the effects of surtaxes and their prevalence in the United States. The closest consequence of this was an investigation by the Australian government.
The survey found that 68% of respondents believe retailers and other businesses should not charge their customers additional fees for credit card payments. My advice is to read the play. Americans generally want to pay a clear and fair price. They don`t want a fee to be charged for every little thing. What`s next – a fee for air conditioning? Where to use the bathroom? Even airlines (which have a much more captive audience) don`t. For example, a merchant may be subject to a 6% discount rate and choose to pass on those costs to a customer under the new Colorado law. However, visa and Mastercard rules currently limit the amount a merchant can charge a customer to the lower amount of the merchant`s discount rate of 4%. While Colorado law may allow the merchant to impose a 6% surcharge on customers, the card branding rules would limit the surcharge to 4%. Colorado is the latest state to allow surcharges on credit card transactions, leaving only two with bans in the middle of a national departure of them. DISCLAIMER: Due to the generality of this update, the information contained in this document may not be applicable in all situations and should not be implemented without specific legal advice based on certain situations. Business owners must pay a credit card processing fee. .