What merchants need to know about the credit card surcharging rules?
On November 9, 2012, the U.S. District Court for the District of New York preliminarily approved the Payment Card Interchange Fee and Merchant Discount Antitrust Litigation settlement proposal. This settlement agreement is between retailers, payment networks and major card issuers concerning merchant interchange fees, and is worth an estimated $7 billion dollars.
Merchant Requirements for Surcharging-
- Continue to comply with all applicable state or federal laws, including state laws regarding surcharging of credit or debit card transactions; and federal/state laws regarding deceptive or misleading disclosures.
The following states currently prohibit surcharging:
California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.
Notify the Brands and Acquirer 30-days in advance of implementing surcharge fees via an online registration form. See notification link below.
- Surcharge fees capped at 4%, and must not be more than the merchant discount rate (interchange fees).
- Display notification to its cardholders at the Point-Of-Sale. POS signage must be displayed at the register/checkout for store fronts, and via the payment acceptance web page for electronic commerce merchants.
- Implement surcharges in a manner which ensures a level playing field amongst all general purpose credit cards (Visa, MasterCard, Discover, American Express and PayPal). To further clarify, a merchant cannot have surcharge fees on Visa and MasterCard but no fee for Discover transactions - the surcharge fee must be the same for each Brand accepted by the Merchant.
- American Express and PayPal currently do not allow surcharges. If the merchant accepts PayPal or American Express, they cannot implement surcharges on any of the other card Brands.
- Not charge a surcharge on Debit (Signature or PIN).
- Not charge a surcharge on Pre-paid cards.
- Must return original purchase - surcharge fee when a Refund (Return) is conducted.
Surcharge functionality is not mandated for existing or new POS applications. If a merchant chooses to implement surcharge fees, they must select or develop an application which supports the following mandated POS functionality:
- POS application must capture the Surcharge Fee separately than the Purchase (Sale) Amount within the request message to the Host (Processor).
- POS application receipts, the merchant and cardholder copies, must reflect on the printed receipt, both the Sale/Purchase amount and the Surcharge/fee amount.
Some questions to consider before you decide to surcharge your customers.
-What will my customers think?
-What will I need to disclose to my customer?
-What will my competition do?
Here is a link to Visa's Merchant Surcharging Considerations and Requirements-
MasterCard Surcharging Rules-