By Scott W. Lee, JD, CCE, Vice President, NACM Business Credit Services

To Surcharge or Not to Surcharge

You have likely heard that merchants will be adding, or at least now can add, the fee charged for credit cards to the price of a sale. It is being referred to as a “surcharge.” There are many misconceptions and there are still many unanswered questions about how this is to be handled. It may sound like a great idea as a merchant – then again . . . well, that is up to you.

(Please do not substitute this article for sound research on your part or the help of your credit card services provider. You need to discuss your particular situation with your service provider if you determine you want to add a surcharge. Be advised that your service provider may not be happy to help.)

Perhaps a little background will be helpful.

Whether a merchant can add a fee to a credit card sale has not been regulated by statute in the past. It was and is the subject of contract between the merchant and the service provider. However, Visa and MasterCard were sued on this issue because they refused to negotiate on the issue. After all, who, besides the government, really had the power to negotiate with these giants?

The credit card companies don’t want merchants to add a fee for fear purchasers will stop using credit cards. A settlement agreement was reached in the lawsuit that allows for merchants to add a surcharge to the sale for the cost of the credit card fee previously borne by the merchant.

But it isn’t as simple as now you can charge the fee or not charge the fee. Debit cards were not included in the settlement, so, as I understand it, a surcharge is not allowed on debit cards. Next, some states have weighed in and prohibit the surcharge. Utah does not allow the surcharge for transactions under $10,000. The settlement only applies to purchases in the United States. American Express and Discover were not part of the law suit and, therefore, not part of the settlement. There are lots of technical rules in the stipulation and merchants are subject to the rules unless they opt out of the lawsuit and file their own lawsuit (which is not a real good idea.)

Point of Sale. You need to understand where the point of sale is because some of the states have created statutes where none existed on the issue. You may or may not be subject to any given state’s law on the issue. It is important where the sale takes place. Is it at your bricks and mortar store? Is it from where your . . . read full article