Surcharge FAQ
General Questions
Q: What is a payment card surcharge?
A: A payment card surcharge, or checkout fee, is an additional charge added to a customer’s bill when they choose to pay with a card. This fee helps merchants offset the costs of processing card payments.
Q: Why would a merchant choose to add a surcharge?
A: Merchants may add surcharges to recover some of the costs associated with processing card payments, such as transaction fees and administrative expenses.
Surcharging Rules
Q: Can I add a surcharge to card transactions?
A: Merchants may add surcharges to certain types of card transactions but must comply with industry regulations, applicable laws, and provide clear disclosures to customers. Some card types, such as debit or prepaid cards, may not be eligible for surcharges.
Q: Can I assess a surcharge on transactions where the customer selects “credit” on a debit card at the point of sale?
A: No. Transactions processed with a debit card cannot be subject to a surcharge, even if the “credit” option is selected.
Q: When can I start applying surcharges?
A: Merchants must notify their payment processor or acquirer in advance (commonly 30 days) and ensure compliance with disclosure requirements before surcharging.
Q: Are there limits on the surcharge amount I can assess?
A: Yes. The surcharge cannot exceed the merchant discount rate for the applicable credit card, with a maximum cap of 4%. For example, if your discount rate is 3%, the surcharge cannot exceed 3% of the transaction total.
Q: Can I choose which types of card transactions to surcharge?
A: Merchants may apply surcharges broadly or to specific categories of eligible transactions, but they must ensure consistency and fairness within their chosen approach.
Disclosure Requirements
Q: Am I required to notify customers about surcharges?
A: Yes. Merchants must disclose the surcharge amount at the point of sale and include it clearly on all customer receipts. Signage or notifications should also inform customers of the surcharge before completing their purchase.
Q: What information should the disclosure include?
A: Disclosures should:
- State that a surcharge applies to certain card transactions.
- Include the surcharge percentage or dollar amount.
- Be prominently displayed at the store entrance, point of sale, or checkout page online.
State and Regional Regulations
Q: Are there locations where surcharging is prohibited?
A: Yes, certain states such as California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas prohibit surcharges. Merchants must comply with local laws and should consult legal counsel to ensure adherence to relevant regulations.
Q: I operate in multiple states. Can I surcharge in some states but not others?
A: Yes. Merchants can apply surcharges in states where it is allowed while refraining from doing so in states where it is prohibited. Ensure all practices align with applicable laws in each state.
Specific Scenarios
Q: Can I apply surcharges to only certain types of transactions?
A: Yes. Merchants may choose to apply surcharges either universally across eligible transactions or to specific types of transactions, as long as they comply with applicable rules and maintain consistency.
Q: Does surcharging apply internationally?
A: Surcharging rules and regulations vary by region. Merchants operating outside the U.S. must follow local laws and payment processor requirements.
Compliance and Resources
Q: What steps must I follow to implement a surcharge?
A: Merchants must:
- Notify Visa and their acquirer at least 30 days before implementing the surcharge.
- Limit surcharges to credit cards only and not exceed the merchant discount rate for the applicable card (up to a maximum of 4%).
- Clearly disclose the surcharge at the point of sale and on every receipt.
- Ensure compliance with any state or federal laws, as some states prohibit surcharges.
Q: Where can I get more information about surcharging rules?
A: Merchants should consult with their payment processor, legal advisors, and industry guidelines for detailed compliance information.
Q: What should I consider before deciding to surcharge?
A: Before implementing surcharges, consider:
- The potential impact on customer experience and satisfaction.
- Competitor practices regarding surcharges.
- Compliance with all applicable regulations and processor requirements.
- Alternative options, such as offering discounts for cash payments.