Conversation with Merlin [email protected] · Fri Nov 10 2023

is it illegal to charge a credit card fee?

In most U.S. states, adding convenience fees to credit card transactions is legal, but there are still rules businesses must follow when doing so. Businesses can charge two types of fees: convenience fees and surcharges.

A convenience fee is charged when a customer uses an unconventional form of payment for the business. These fees are legal in all 50 states but must be clearly communicated at the point of sale. There also needs to be another form of payment offered that doesn't the fee.

A surcharge, on the other hand, is charged for using a credit card for payment. These fees are legal in states but must be clearly displayed at the point of sale and on the receipt. Moreover, surcharges can't exceed the cost of accepting the card or 4 percent, whichever amount is lower.

However, certain states have different regulations to these charges:

  • In California, for instance, anti-surcharge laws are in place but may be unenforceable due to recent court decisions.
  • In Maine, surcharging is permitted for government entities only.
  • In others like New York, Texas, and Florida, anti-surcharging laws exist but may not always be enforced due to recent legal findings.

Please check with your local authorities or a legal professional to know the specific rules in your region.

Seeing retailers offer discounts for cash payments or assess fees when customers pay by credit card is becoming more common than ever. In most U.S. states, adding convenience fees to credit card transactions is legal, but there are still rules businesses must follow when doing so. Learning about the convenience fee rules that affect your area can help ensure you aren't overcharged on your credit card transactions. As the U.S. moves toward a cashless economy, the subject of credit card processing fees passed on by small business sellers becomes more topical. Many businesses take responsibility for the merchant fees that come along with processing credit card payments by incorporating them into their pricing. However, some pass these fees to the consumer. But are convenience fees legal? Can businesses charge you for using a credit card? Lets take a closer look: Convenience fees and surcharges: Common fees businesses charge In short, merchant fees are legal in most states as long as the business follows the necessary protocols. But before diving into these specific protocols, its important to distinguish between the two kinds of fees that a business can charge: convenience fees and surcharges. What is a convenience fee? A convenience fee is charged when a customer uses a form of payment that isnt customary for the business. For example, a business that typically accepts online payments may offer the option to pay by phone for a fee. 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 theres another preferred form of payment as an option. What is a surcharge? When a business charges a fee for a form of payment, whether in person, online or by phone, its called a surcharge. Credit card surcharges are applied when you use your credit card to make a payment. In states where surcharges are legal, they must be clearly displayed at the point of sale and on your receipt. Regulations for surcharges are U.S.-specific, and merchants are prohibited from imposing surcharges on card payments abroad (with the exception to this rule being Canada). Who can charge for using a credit card? You may be wondering why a seller would charge you a fee if youve already paid for your purchase. The reason most sellers charge fees boils down to how credit card transactions work. Card issuers charge a merchant fee whenever you use your credit card. The merchant is expected to cover this fee to process credit card payments. However, those fees can add up. In some cases, businesses pass these fees on to consumers in the form of surcharges to avoid incurring the additional costs themselves. While some merchants dont know they can charge extra, many avoid doing so simply because of the potential to create negative customer sentiment. It can also present a hassle for certain businesses to figure out how to impose the charges. Instead, many businesses take on the cost of processing credit card payments as a part of their overhead. Gas stations, for example, fall under the category of businesses that can charge convenience fees and surcharges. However, the reason you are paying more with a credit card at the pump may come down to a game of semantics. How much can a business charge for using a credit card? When a business chooses to impose a credit card surcharge, there are protocols that have to be followed. For one, the business has to notify the appropriate credit card associations and clearly disclose that it charges a fee for the use of a credit card. Credit card surcharges cant exceed the cost of accepting the card or four percent, whichever is the lower amount, even if it costs the business more than that amount to process your credit card payment. Convenience fees work similarly as they are meant to help a business cover processing costs. Convenience fees usually range between two and three percent of the purchase price. Both of these fees are meant to hel

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With clients preferring credit card payment options over cash and debit, credit card surcharges have become an attractive model for legal professionals to offset processing fees at their firms. However, credit card surcharge laws vary by state and require considerable research before implementing them in your practice. In this article, well explain everything you need to know about credit card surcharges, including which states allow them (and which do not), how to implement them, and the regulations that must be followed. What Is a Credit Card Surcharge? Each time a merchant accepts and processes a credit card transaction, they pay a processing fee to the appropriate financial institution. A credit card surcharge (or cc surcharge) is a fee enforced by the merchant to compensate for some of the cost of payment processing. This fee can only apply to credit cardsand never debit, even when a debit card is run like a credit. As for calculating the fee, surcharges are predominantly percentage-based. Lets look at an example. Imagine a local dentists office that typically processes in-person payments. If a patient requests to pay over the phone, the office may implement a convenience fee of $1.95. Now, in the same office, a credit card surcharge may look like this: When the patient chooses to pay with credit, their bill will reflect a 2% cc surcharge for services rendered. The patient is made aware of the surcharge and the fee is calculated from the total cost. Are Credit Card Surcharges Legal? If youre wondering if it is legal to charge credit card fees, the short answer is yes. The practice of surcharging was outlawed for several decades until 2013 when a class action lawsuit permitted merchants in several U.S. states to implement surcharges in their businesses. This lawsuit sparked a chain reaction in the following years as more states adopted a pro-surcharging stance. Proponents of surcharging have argued that anti-surcharging laws drive up prices for goods and services across the board and, in some cases, may even be a violation of the First Amendment. Credit Card Surcharge Laws by State The legal landscape of credit card surcharging fluctuates, but as of spring 2023, credit card surcharging is legal in most states. However, there are nuances to be aware of. In some of the states below, there are certain restrictions on credit card surchargingfor example, in Maine, surcharging is permitted for government entities onlyand in others on the list, anti-surcharging laws still exist but arent necessarily enforceable as a result of recent court decisions: California Florida Kansas Maine New York Oklahoma Texas Utah Note: Surcharge laws are subject to change. Check with your local bar association for the most updated information in your state. States Where Credit Card Surcharges Are Legal States A-L States M-O States P-Z Alabama Maine Pennsylvania Alaska Maryland Rhode Island Arizona Michigan South Carolina Arkansas Minnesota South Dakota California Mississippi Tennessee Colorado Missouri Texas Delaware Montana Utah Florida Nebraska Vermont Georgia Nevada Virginia Hawaii New Hampshire Washington Idaho New Jersey West Virginia Illinois New Mexico Wisconsin Indiana New York Wyoming Iowa North Carolina Kansas North Dakota Kentucky Ohio Louisiana Oklahoma Oregon Some of the states listed enforce limitations on surcharges. In others, anti-surcharging laws still exist but arent necessarily enforceable as a result of recent court decisions. Lastly, surcharge laws are subject to change - please check with your local bar association for the most updated information in your state. States Where Credit Card Surcharges Are Illegal Currently, credit card surcharging is illegal in the following states and territories: Connecticut Massachusetts Puerto Rico Credit Card Surcharging Rules Major credit card institutions set forth rules and regulations for merchants to follow when implementing surcharges. While there are slight variations among brands, gene

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Updated 10:56 a.m. UTC Sep. 5, 2023 Editorial Note: Blueprint may earn a commission from affiliate partner links featured here on our site. This commission does not influence our editors' opinions or evaluations. Please view our full advertiser disclosure policy. Extreme Media, Getty Images If you regularly use a card at checkout, you may have encountered an added service fee for paying with your card. While businesses were not allowed to charge fees for paying with plastic in the past, updated rules allow companies to add a surcharge or fee when customers use a card for payment. Keep reading to learn how businesses can charge extra when using a credit card. What are credit card processing fees? Businesses must pay a modest credit card processing fee whenever a customer makes a card-based payment. Fees are often around 1% to 3% of the transaction amount, which merchants pay to their credit card processor. So, for example, when you make a $100 purchase at a local restaurant or store, the seller only gets about $97 to $99, with the remainder going to credit card processing fees. Fees are divided between the card network (Visa, Mastercard, American Express and Discover, for example), the merchants processor (such as Square, Stripe, PayPal and major banks) and potentially other companies involved in transaction processing. Understanding surcharges vs. convenience fees You may come across convenience fees and surcharges when shopping online or in person. While its never fun to pay extra, understanding how these fees work may help you avoid or better control them. Convenience fees are add-on charges related to extra services. For example, if you buy a movie ticket online or by phone through a third-party service, the third party can charge a convenience fee. If youve bought concert tickets through a service like Ticketmaster, youre likely very familiar with convenience fees. If a business normally accepts cash payments, they may add a convenience fee for credit card sales. Surcharges are add-on charges that help companies to recoup the higher cost of a credit card transaction. If a business adds a surcharge to credit card payments, its to offset the 1% to 3% fee theyre likely paying for credit card processing. Note: In place of surcharges, some businesses require a certain minimum purchase amount for card-based payments to ensure they earn enough to cover the added costs. How much are typical credit card transaction fees? When you go to the register in most states, you shouldnt be shocked to see a surcharge added to your purchase. Surcharges vary based on the location and merchant. Before 2013, surcharges were generally nonexistent. After a class action lawsuit against Visa and Mastercard, businesses won the right to mark up card-based purchases to help cover their added costs. Surcharges may be up to 4% of the purchase at most but are often around 2% to 3%, in line with the sellers processing fees. At gas stations, you may have noticed some sellers mark up purchases by $0.05 or $0.10 per gallon when paying by card. They may call the cash price a discount, but regardless, youll pay more at some gas stations when paying with a credit card because of the surcharge. State or local governments may regulate credit card transaction fees. Well break down which states allow surcharges and which prohibit or limit them below. Are credit card fees legal? Credit card surcharges are legal unless otherwise prohibited by state or local law. Certain states have specific disclosure requirements, while others limit what businesses can add as a credit card surcharge. While laws can change at any time, only 10 states currently impose some type of restriction or disclosure requirement on credit card surcharges. Connecticut, Maine, Massachusetts and Oklahoma prohibit or limit surcharges. Credit card surcharge legality across the U.S. Federal court cases regarding surcharge legality may override state laws in some situations. Heres a glance at states wit

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