Surcharges

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March 13, 2018
Cardless and PIN-less ATMs are here
March 27, 2018
Online payment portals
March 13, 2018
Cardless and PIN-less ATMs are here
March 27, 2018
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Mobile Payments

Mobile Payments

Credit card processing fees can be expensive for merchants and as a merchant it can hit your bottom line hard. It has been a problem affecting merchants around the United States and in some states it seemed that an answer was found: Surcharges.

We’ve all had bills that have all kinds of additional fees tacked on. Just look at your cable bill if you don’t believe us. A fee here, a surcharge there. It is that company’s way of taking something that they are being charged and passing it on to the consumer. In most cases it is a small fee, something less than $.50 but over the course of hundreds or thousands of transactions that money can add up. For a merchant it can make a huge difference in the bottom line.

The surcharge cannot be applied all of the time though. Only credit card transactions can be hit with a surcharge and in some states it is illegal to add it to a customer’s transaction. Ten states in the country do not allow it: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Any business operating in those states, even those that operate in other states as well, cannot add it though California’s law was declared unconstitutional in January by US Court of Appeals for the Ninth Circuit. Many merchants instead choose to incentivize their customers to use a different method of payment like cash or a check.

If you as a merchant want to add a surcharge to a transaction there are some rules that need to be considered. Each credit card company has its own set of rules, so read them carefully before starting. These companies do not want to discourage their cardholders from using them so these rules are strict. There are limits to how much of a surcharge can be applied and that must be posted inside the store. The surcharge must also be listed as a separate item on the receipt. If this is something that you would like to do you must also notify your processor 30 days in advance. There are also different kinds of surcharges, like to cover all of one particular card or to cover just particular lines of cards. You can choose one or the other.

Merchants are also not allowed to have a higher surcharge for one card over another. Visa and MasterCard set a maximum rate at 4% (most merchants charge about 2.5%), which may not cover the interchange fee for American Express or Discover cards. All surcharge totals must be reported back to your processor and the easiest way to do that is to have your POS software do it for you (CardConnect has this feature).

Surcharges are a hot topic right now. A case went before the US Supreme Court from merchants in New York contesting the legality of their state’s surcharge ban. The merchants alleged that the bad violated their First Amendment rights and the case was sent back to a lower court. The court agreed with the merchants that this was not a price regulation issue but did not decide whether the state-by-state ban was lawful. This will continue to play out and could have far reaching implications.

Is adding a surcharge right for your business? The biggest question is will your customers take their business elsewhere if you begin doing so? It is a question that many merchants are asking today and it is a question that only you can answer.