Payment card surcharges have become a prominent topic in the payment processing industry, especially with the recent changes in Visa's surcharge rules. In this comprehensive blog, we will delve into the concept of surcharging, its legality across different states, the revised Visa surcharge regulations, and the implications for businesses and consumers.
Understanding Payment Card Surcharging
Payment card surcharging involves adding an extra fee to a customer's credit card purchase to cover credit card processing fees. While it may be marketed as "Cash-Discount" or "Zero-Fee" processing, it's important to note that a processing fee still exists, albeit shifted to the merchant.
Legal Considerations for Merchants
Merchants in the United States and U.S. territories have been allowed to add surcharges to certain credit card transactions since January 27, 2013, as part of a legal settlement. However, adherence to consumer
disclosure and other requirements agreed upon in the settlement are crucial.
Factors to Consider for Merchants
Before implementing surcharges, merchants should carefully evaluate several factors:
Impact on customer experience: Surcharges may influence customer perception and satisfaction.
Competitor practices: Understanding industry competitors' surcharging practices can provide insights for informed decisions.
Disclosure requirements: Clear and proper disclosure of surcharges to customers at the point of sale is essential.
Cost analysis: Assessing the costs associated with different payment methods helps determine surcharge viability.
State Laws on Credit Card Surcharging
It's important to recognize that credit card surcharging legality varies across states and countries. As of 2023, Connecticut, Massachusetts, and Puerto Rico prohibit credit card surcharging. In other states, anti-surcharging laws exist but are unenforceable due to recent court decisions.
Changes to Visa's Surcharge Rules
Effective April 15th, 2023, Visa has implemented significant revisions to its surcharging regulations, including:
Notification Requirements: Merchants are now required to notify their acquirers, rather than Visa directly, at least 30 days in advance of commencing surcharging.
Maximum Surcharge Cap: The maximum allowable credit card surcharge in the U.S. and U.S. territories has been reduced from 4% to 3%.
Surcharges only apply to credit card purchases and cannot be applied to a debit card or prepaid card transactions. Merchants can selectively surcharge Visa credit cards but must adhere to the same terms and conditions.
Potential Penalties for Non-Compliance
Visa actively monitors compliance and imposes significant fines on merchants who fail to adhere to surcharging regulations. The fines structure for non-compliance can be found on page 150 of the document provided below. Merchants should review and understand these penalties to ensure compliance and avoid financial consequences.
Guidance for Businesses Regarding Visa Surcharge Changes
To navigate these surcharge changes successfully, businesses accepting Visa payments, especially those new to surcharging options, should seek guidance and support. At Make the Impact, our merchant services team possesses the expertise and experience to help businesses understand the revised Visa surcharging rules and adjust their payment processing systems accordingly. We provide valuable assistance to ensure compliance and help businesses avoid costly errors.
Adapting to the Changes
Compliance with the new regulations is crucial as the changes impact businesses across the board. Surcharging plays a vital role in many businesses' payment processing strategies, necessitating adjustments to existing systems.
Non-compliance with the forthcoming regulations on April 15th, 2023, may result in fines, penalties, or even the termination of a business's merchant services account.
Stay Informed and Adapt
Staying updated on the latest credit card surcharging regulations is essential for businesses and consumers alike. By understanding surcharging concepts, the legal landscape across states, and the revised Visa surcharge rules, businesses can navigate this aspect of payment processing effectively.
Partnering with trusted advisors like Make the Impact enables businesses to adapt their practices and ensure compliance with the new regulations. Compliance is paramount to avoid potential penalties or account termination.
Stay informed, collaborate with trusted advisors, and adapt to the evolving credit card surcharging landscape. By doing so, businesses can continue providing seamless payment experiences to customers while effectively managing costs.