Card surcharges: Is this finally the end? (2024)

FAQs

What is the new law for credit card fees? ›

Under the new regulations, credit card issuers, including Bank of America, Capital One, Citibank and JPMorgan Chase, cannot charge more than $8 for a late payment unless they can explicitly point to data showing they must impose higher fees to make up for losses.

In 1985, California passed a law (Civil Code section 1748.1) that prohibited merchants from adding a surcharge (an extra fee) when customers pay by credit card instead of cash.

A new law took effect in New York this past weekend, requiring businesses to inform customers about credit card surcharges that will cost them more money at the register. Starting Sunday, businesses must post the total cost of goods or services with a credit card, including surcharges, before customers checkout.

As of this writing, Connecticut, Massachusetts, Maine, and Puerto Rico do not allow credit card surcharges and there are additional requirements and risks for surcharging in California, Colorado, Florida, Kansas, New York, Oklahoma, and Texas.

On March 5, 2024, the Consumer Financial Protection Bureau (Bureau) announced the final rule governing late fees for consumer credit card payments, likely cutting the average fee from $32 to just $8.

Businesses cannot impose any surcharge for using the following methods of payment: consumer credit cards, debit cards or charge cards.

Credit card surcharging

This practice is legal in all but four states — Connecticut, Maine, Massachusetts and Oklahoma — additionally, Colorado caps the surcharge fee at 2%. It is also important to note that surcharging is not allowed for debit cards, even when they are run as a credit transaction.

But passing on credit card fees to customers is legal in the majority of the U.S. Whether or not a merchant can charge them boils down to local laws and the parameters provided by payment processing networks. Being familiar with the restrictions in your area is important to ensure you aren't overcharged.

The easiest way to avoid any card surcharges is to pay for everything using cash. If you're not a fan of carrying around cash, you can choose to only buy from businesses that don't charge you to pay by card.

A surcharge, also known as checkout fee, is an extra fee charged by a merchant when receiving a payment by cheque, credit card, charge card or debit card (but not cash) which at least covers the cost to the merchant of accepting that means of payment, such as the merchant service fee imposed by a credit card company.

Is there a cap on credit card surcharge? ›

The surcharge that merchants pass on to consumers cannot exceed the cost merchants are charged by credit card payment processors. The current cap on these fees is 4%. “In some cases, the processor will reduce the cost if the merchant balks at 4%,” said Fortney. “But it's very rare for a surcharge to be less than 2.5%.”

If you're wondering if credit card surcharges are legal in your state, the answer is probably yes. The only states that currently prohibit surcharges are Connecticut, Massachusetts, Maine and Oklahoma. A recent ruling limits merchants in Colorado to a maximum surcharge of 2%.

If a business wants to offset processing fees, you could have to pay a surcharge for using a credit card. However, if you want to avoid this fee, pay with your debit card, cash or check. If the benefits of using a credit card outweigh the costs, then paying a surcharge may be the route you should choose.

Credit card customers can dispute any charge that they didn't make, if it is for the wrong amount, or if they're dissatisfied with the product or service they received. Typically, the best first step is to contact the vendor. However, if you can't get a refund or resolve the issue, you should dispute the transaction.

Is Debit Card Surcharging Legal? For debit cards and prepaid cards, surcharging is prohibited—even when the card is run as a signature-based transaction without the PIN. This restriction was implemented by the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

Credit card new rule: Set your credit card due date when you have a high cashflow. To not default on your credit bill, your credit card due date should be at a time when you have enough money to pay it. The thumb rule is to select a bill due date which is usually after your salary is credited.

The answer is: yes, if your business operates in states where it is legal to do so. As of the time of publishing this, the practice of imposing additional fees on credit card transactions (i.e., credit card surcharges) is prohibited in only three U.S. locations: Connecticut, Massachusetts, and Puerto Rico.

Merchants are prohibited from imposing surcharges on customers who choose to use a credit card instead of cash or other available payments. Merchants can impose surcharges if no other payment options are available. Merchants may also offer discounts for payment by cash, check or other methods unrelated to credit cards.

California Coerced Debt: California SB 975, for debts incurred after July 1, 2023, requires a collector to cease collection until it completes a review when the debtor provides documentation and a sworn statement that the debt was coerced. A person who coerces a debt is civilly liable.