Currently, 10 U.S. states have surcharging restrictions including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Please consult with legal counsel to determine whether your practices comply with relevant state law. Q.
Technically, it's illegal to surcharge credit card transactions in Florida. But federal courts have overruled this law, allowing merchants to surcharge credit card transactions without penalty. Let's go through this step-by-step to ensure you fully understand what this means.
So, is it legal for a business to add a surcharge fee for credit card transactions in Texas? If you're going just based on Texas law, the answer is no—technically, it's illegal in most circumstances to impose a credit card surcharge fee surcharge in Texas.
Convenience fees are normally a flat fee or a small percentage of the total payment, but they can add up to a substantial sum if the payments are large or recurring. You may be able to avoid convenience fees by paying with cash or another form of payment.
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.
Convenience fees are legal in all 50 states but must be clearly communicated at the point of sale. Additionally, a convenience fee can only be imposed if there's another preferred form of payment as an option.
Currently, credit card surcharging is illegal in the following states and territories: Connecticut. Maine. Massachusetts.
Limits the maximum surcharge amount per transaction to 2% of the total cost to the buyer or lessee for the sales or lease transaction or the merchant discount fee, which is defined as the actual fee that a seller or lessor (merchant) pays its processor or service provider to process the transaction.
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.
Any time we buy something these days, it seems like there's a hidden fee added to the bill. At restaurants, it might help cover a credit card company's processing fee or employee pay and benefits.
The No-Surcharge Rule (NSR). The NSR means that a merchant charges at most the same amount for a payment card1 transaction as for cash. If the merchant decides to apply a discount for payments in cash that discount cannot be extended to any specific card brand.
The rule for convenience fees requires businesses to disclose the fee before payment, ensure it's optional, and not a surcharge on the transaction amount. The fee must cover the cost of a specific service, and businesses must comply with regulations, ensuring transparency and fairness in its application.
"Convenience of the Employer" Rules
Connecticut, Delaware, Nebraska, New Jersey, New York and Pennsylvania maintain this "Convenience of Employer" rule. In these states, such employees are taxed in the state in which the employer is located, again unless the employer requires such services to be performed out-of-state.
No, surcharging for debit card transactions is prohibited under the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This applies to all types of debit cards, including prepaid cards.
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.
Consumer Financial Protection Bureau Releases Final Rule on Credit Card Late Fees, with Overdraft Fees on Deck. On March 5, 2024, the Consumer Financial Protection Bureau (Bureau) announced the final rule governing late fees for consumer credit card payments, likely cutting the average fee from $32 to just $8.
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.
As of the time of writing, surcharging is legal in all but four states (Connecticut, Maine, Massachusetts, and New York*) and Puerto Rico. Note: Surcharges are governed by state law and card brand rules (like those published by Visa and Mastercard), each of which are subject to change.
The Service Fee Merchant does not deal with the extra fee and only receives the amount that the customer owes. In Convenience Fee Processing, the “fee” amount goes to the merchant and the merchant uses the fee to offset the processing fees.
Let's be clear about the classifications of these fees according to state and federal regulations as well as credit card companies: Credit Card Surcharge - is a fee that is levied for any purchase with a credit card. Convenience Fee - is a fee that is charged on non-standard payment channels for ease of payment.
In the first quarter of 2023, the Federal Reserve Bank of New York estimated total credit card debt for all Americans was $986 billion. Alaska residents carry the highest credit card debt, while residents of Iowa have the lowest per person.
Are credit card surcharges legal? Yes, except in some states with laws that prohibit credit card surcharges. Florida has a law prohibiting credit card surcharges, but that law was held unconstitutional by federal courts. Therefore, merchants in Florida may add a surcharge to credit card purchases.
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.