Basically, surcharging is a way for merchants to pass on swipe/credit card fees on to their customers (which can include fees like interchange fees and assessment fees). That means if a customer wants to make a credit card purchase, they'll be charged an additional fee to cover the payment processing costs.
To avoid a credit card surcharge, you can pay with alternative methods such as cash, debit cards, or mobile payment apps. Some businesses also offer discounts for non-credit card payments, providing an incentive to choose other payment options that help avoid credit card surcharge.
Most credit card companies require merchants to disclose credit card surcharges in online transactions, on a sign at the store's point of entry and point of sale, and on the receipt.
What Is a Surcharge? A surcharge is an additional charge, fee, or tax that is added to the cost of a good or service beyond the initially quoted price. A surcharge is often added to an existing tax and is not included in the stated price of the good or service.
If you're wondering if it is legal to charge credit card fees, the short answer is yes in most states. The practice of surcharging was largely outlawed for several decades until 2013 when a class action lawsuit permitted merchants in several U.S. states to implement surcharges in their businesses.
Most often, fees are the payment one makes in return for service, such as mowing a lawn or drafting a will. Sometimes more than one fee is charged for a service. Governments (local and federal) charge fees for licenses, such as a driver's license or a passport.
There are a few ways of legally passing on credit card fees to customers. Some are direct, and some are indirect. Adding a surcharge to cover the credit card fee is the more direct method while incentivizing cash payments is indirect.
Credit card companies must disclose important information like the APR, finance charges, grace period, fees, penalties, payment due dates, and minimum payment warning. A Schumer Box is a standardized table that summarizes key credit card terms and fees.
Here are three scripts you may want to use to notify your customers about an upcoming convenience fee: In-person: “There will be a $3 flat fee for online payments and credit cards. Would you like to use cash or another form of payment?” Online: “By selecting 'credit,' you agree to pay a $3 convenience fee.”
Q: Where are credit card surcharging and convenience fees illegal? As of January 2023, only two states and one jurisdiction still outlaw the use of credit card surcharges. They are a result of non-qualified transactions of different communications methods.: Connecticut, Massachusetts, and Puerto Rico.
A surcharge is not a convenience fee. A convenience fee is levied by a merchant for offering customers the privilege of paying with an alternative non-standard payment method. Merchants can process convenience fees in all 50 states. A surcharge is levied by a merchant for customer purchases made with a credit card.
Businesses incur costs for processing certain card payment types. Some businesses include these costs in the prices they charge for their products. Others pass the costs on as a surcharge for paying with the card.
Use cash where you can
The easiest way to avoid card surcharges is to pay by cash. While businesses can charge a surcharge for paying by debit or credit cards, they can't charge a surcharge for paying by cash.
Surcharging is widely accepted in the US except in Maine, Massachusetts, Connecticut, and Puerto Rico. Illinois, Colorado, Georgia, Kansas, Texas, Nevada, New York, South Dakota, New Jersey, Minnesota, California, Florida, Oklahoma, Michigan, and Montana allow surcharging with certain contingencies.
No. The ability to surcharge only applies to credit card purchases, and only under certain conditions. U.S. merchants cannot surcharge debit card or prepaid card purchases.
Never borrow more than 20% of your annual after-tax income. Keep your monthly debt payments to less than 10% of your monthly after-tax income. Keep track of your purchases and don't buy expensive and unnecessary impulse items. This is the best way to increase your credit score and avoid fees.
A Schumer Box is a required summary of a credit card's rates and fees that is visible in credit card agreements. It shows what the card will cost consumers, including the various annual percentage rates (APRs), an annual fee, a cash advance fee, a late payment fee, and a returned payment fee, among other expenses.
Some examples of violations are the improper disclosure of the amount financed, finance charge, payment schedule, total of payments, annual percentage rate, and security interest disclosures.
Whether accepting payments online or in person, banners, posters, and other appropriate types of signage should inform customers that an extra fee, such as a surcharge, will be added (as a separate line item) to the final dollar amount of their credit card purchases.
The standard credit card convenience fee wording typically includes a clear and concise explanation of the additional fee charged for the convenience of using a credit card for payment. A standard wording could be: “A credit card convenience fee of [percentage or flat amount] will be applied to all transactions.
Use a different payment method.
Merchants often charge convenience fees or surcharges when credit cards aren't a standard payment method. If you have a rent, utility or tax bill, consider paying by check or electronic transfer instead.
A surcharge is an additional fee that a business imposes on a customer when they use a credit card for payment. This fee helps cover the costs associated with processing credit card transactions (such as merchant fees or payment gateway charges) by passing them down to the consumer.
If most of your customers pay with a credit card, a surcharge effectively increases your prices, putting your business at a competitive disadvantage. For businesses that compete in a price-sensitive market, surcharging can hurt your bottom line because customers may decide to buy from your competition.
Examples of surcharge in a Sentence
Verb contends that with the present tax structure, the state's lower-income residents are being surcharged and the wealthiest residents are getting off too lightly Noun The airline has added a $20 fuel surcharge on all international flights.