Can you Legally Pass on Credit Card Fees to Customers?
When it comes to credit card fees, there are a lot of gray areas. Most importantly, consumers are protected from hidden or excessive fees by law. However, some loopholes allow companies to pass on certain costs to their customers. So what exactly is allowed and what isn’t? Let’s take a closer look.
Credit Card Fees and the Law
The legality of passing on credit card fees to customers has been in debate for years. In 2012, the Supreme Court ruled that businesses could not add a surcharge for customers who use a credit card but could offer a discount for customers who pay with cash.
However, this ruling only applies to businesses that accept credit cards from all four major credit card issuers: Visa, MasterCard, American Express, and Discover.
So what does that mean for businesses that only accept one type of credit card? Technically, they could still add a surcharge, but most choose not to because it would be bad for business. After all, no one likes paying extra fees, and customers would likely go to a competitor who didn’t charge them.
Can a Business Legally Pass on Credit Card Fees to their Customers?
Yes, you can legally pass credit card fees to customers, but some restrictions exist. You must disclose the payment to the customer before they make a purchase, and you can only charge a maximum of 4% of the total purchase price. You also must provide the customer with an opportunity to use another form of payment.
If you don’t follow these guidelines, you may be subject to penalties from your credit card processor or bank. Additionally, your customers may file a complaint with their state attorney general’s office or the Better Business Bureau. So, you must comply with the law before adding any surcharge 4 Ways to Pass on Credit Card Fees to Customers.
If you don’t want to eat the cost of credit card fees, there are a few ways you can pass on the cost to your customers.
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Add a Surcharge
The most direct way to pass on credit card fees is to add a surcharge to every purchase made with a credit card. For example, if your credit card processing fee is 2%, you could charge a 2% surcharge on all credit card purchases.
There are a few things to remember if you go this route. First, not all states allow retailers to add surcharges to credit card purchases. Second, even if your state does allow it, there are still some restrictions. For example, if the program is allowed in your state, only credit card transactions can be surcharged.
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Minimum Purchase Amount
Another way to pass on credit card fees is to set a minimum amount for credit card purchases. For example, you could require a minimum purchase of $10 for all credit card orders. This would effectively raise the 2% credit card processing fee to 20%.
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Offer a Discount for Cash Payments
Offering a discount for cash payments is another way to encourage customers to use cash instead of credit cards. For example, you could offer a 5% discount for all cash payments. This would effectively lower the cost of credit card fees from 2% to 1.9%.
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Offer Incentives for Using Alternative Payment Methods
If you want to discourage the use of credit cards, you could offer incentives for customers to use alternative payment methods, such as debit cards, checks, or even cash. For example, you could offer a 5% discount for all debit card payments. Or you could offer a $5 discount for every $100 spent when customers pay with cash.
Wrapping Up
Credit card surcharges are a controversial topic, and there is currently a debate raging in the United States over whether or not they should be legal. The key to passing on credit card fees is to do it in a way that doesn’t alienate your customers. No one likes paying hidden fees, so ensure your policy is clearly stated and easy to understand. And always give customers the option to use an alternative payment method if they don’t want to pay the fee.