Surcharges grow more common, even in states where they’re banned


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Businesses tack on fee to cover ‘swipe fees,’ even in states where that’s banned

Fred O. Williams is senior reporter for A business journalist since 1987, his work has appeared in Kiplinger’s Personal Finance magazine, the Buffalo News and USA Today.

Credit card users are seeing their protection from extra
fees eroded, even in states that have laws on the books that ban surcharges for
card use.

Backed by court decisions, some merchants are imposing
surcharges to recover the cost of “swipe fees” they pay to process cards.

Surcharges and free

At Expressions Hair Design in upstate New York, credit card users
face a surcharge of 2.75 to 3.5 percent, owner Linda Fiacco said. The
charge covers her cost of processing credit card transactions through Square.

“Every once in a while [customers] say, ‘I’ll write you a
check instead,’” Fiacco said. But otherwise there isn’t much reaction from
customers – who are warned by a sign that credit card use will cost extra.

Expressions led the charge against New York’s no-surcharge
law. In March 2017, the Supreme Court decided
in its favor
. The court found the law interfered with merchants’ free
speech rights under the First Amendment.

The ruling did not explicitly strike down New York’s law.
The case was sent back to an appeals court to look at the effect on merchants’
speech rights. But that was enough to undermine enforcement – both in New York
and other states with similar laws.

Lower court challenges have also shaken no-surcharge laws in
and California.

The states
with no-surcharge laws
are California, Colorado, Connecticut, Florida,
Kansas, Maine, Massachusetts, New York, Oklahoma and Texas, according to the
National Conference of State Legislatures. Puerto Rico also has a no-surcharge

See related: More merchants adding credit card surcharges

How surcharges work

But while surcharges themselves may be tough to fight, there
are still rules about how they should and shouldn’t be imposed.

Card networks Visa and Mastercard settled
a dispute with retailers
by allowing surcharges in 2013. But they still
have rules around the practice:

  • Dollar
    . The upper limit on surcharges is 4 percent of the transaction.
  • Disclosure.
    There should be a sign at the point of sale. The surcharge should not come as a
    last-minute surprise.
  • Records.
    The surcharge should be printed on receipts.
  • Equal
    . Merchants aren’t supposed to charge a surcharge on only some
    cards and exempt others.

American Express also allows surcharges, as long as they are applied to other credit cards as well. However, merchants that are concerned about card transaction costs might not accept AmEx in the first place.

What recourse do you have if you think a surcharge has been
imposed unfairly?

  • Visa’s
    online complaint form
    is here.
  • Mastercard
    also has
    an online
    complaint form
  • States
    have consumer protection laws
    against undisclosed fees being added to the
    price of goods. If a vendor slaps a surcharge on your bill without warning, a
    complaint to state consumer protection officials such as the attorney
    general’s office
    may be in order.

Where are you more
likely to get hit by a surcharge?

Numbers are hard to come by, but it seems clear that
surcharges are more likely to pop up at independent merchants.

Big retail chains are mostly avoiding surcharges, according
to the National Retail Federation.

“The retail industry as a whole has no intention to
surcharge,” spokesman J. Craig Shearman said. Instead, retailers are pushing
card networks to reduce transaction costs – such as in a lawsuit
between Walmart and Visa

Card networks Visa and Mastercard wouldn’t discuss the
volume of merchants registering to surcharge, although a Mastercard spokesman
said the company is “not seeing anything out of the ordinary.”

But online
, published reports and questions from readers at point
to independent merchants such as restaurants and non-chain retail stores as
businesses likely to impose surcharges.

Convenience fees
versus surcharges

Unlike convenience
, which are narrower in scope, surcharges can pop up at retailers and
merchants in the regular course of business.

Convenience fees are permitted when a merchant sells via a
special channel – such as a movie theater selling tickets online instead of in
person. Many states also permit fees for card use at utilities, government
offices and educational institutions.

For more information, see rules that merchants are supposed
to follow if they accept cards from Visa,
or Discover.

See related: What are my rights regarding credit card surcharges?

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