Credit Card Surcharges Allowed Starting Sunday? It Depends
Starting this Sunday, January 27, merchants can begin surcharging their customers for paying with a credit card, but don't tack on that fee just yet.
According to the terms of last year's settlement of a seven-year, $7.25 billion case between Visa and MasterCard and a group of retailers, following the agreement's preliminary approval, Visa and MasterCard had 60 days to amend their no-surcharging policies that they imposed on card accepting companies. The companies did so, and now, as of Sunday, merchants are within their rights to pass on their credit card processing fees to their customers, if they've met a series of conditions.
First of all, any surcharging activity has to wait until at least 30 days after the merchant has alerted both Visa or MasterCard and its acquiring bank of its intention to charge such a fee. Furthermore, the level of the fee that a merchant can charge is capped to the merchant's acceptance cost, but for merchants imposing a brand-wide surcharge, the surcharge is limited to the lesser of their average effective interchange rate or the maximum surcharge cap, established at 4%.
Merchants imposing a product level surcharge, meaning a surcharge for specific types of Visa or MasterCard products, can charge only what it costs to accept that particular product.
The fee must also be disclosed to the customer, at the point of sale and preferably ahead of time too. But regardless, it is vital that merchants speak with their general counsel and with their acquirer about what rights they have before levying any surcharge on their card-using customers.
- Jacob Barron, CICP, NACM staff writer