U.S. Merchants Can Now Add A Surcharge for Credit Card Transactions, But Be Cautious.

In November 2012, the U.S. District Court for the Eastern District of New York preliminarily approved a proposed settlement agreement with Visa and MasterCard. As part of the settlement, Visa and MasterCard were required to allow merchants to surcharge certain credit card transactions beginning January 27, 2013. The surcharge is being called a “Checkout Fee.”


Be very cautious of surcharging

  1. This is a “preliminary” approval. The final settlement could be prolonged and could impact surcharge capability.
  2. Surcharging is a two-edged sword. Yes it may help pay for the merchant’s cost to process a credit card transaction. However, it can also drive customers away from the merchant’s business. It can also drive customers to pay with something other than a credit card. This may sound advantageous. However, industry studies show that customers spend more when using a credit card.
  3. So far, some of the largest retail merchants have already stated that they do not plan to surcharge.
  4. Currently, 10 U.S. states have surcharging restrictions including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

Understand all the rules if you plan to surcharge

For a complete list of rules and regulations visit our Educational Resources page.

Following are some of the key rules and regulations you need to know before surcharging:

  1. Visa and MasterCard require merchants to notify them and the merchant’s acquirer 30 days prior to implementing a surcharge.
  2. To notify Visa, go to the Visa site above and click on “Notification of Intent to Surcharge” and complete the form. Your merchant account provider may be the acquirer. However, contact your provider to determine if they need any specific information.
  3. To notify MasterCard, go to the MasterCard site above and follow the directions under “Merchant Registration with MasterCard and Acquirer.”
  4. U.S. merchants may assess a surcharge on credit card purchases that does not exceed the merchant discount rate for the applicable credit card surcharged with a maximum surcharge more of 4%.
  5. Brick & Mortar merchants must disclose surcharging at the point of entry and point of sale. Also, the final surcharge amount must be identified separately on the receipt.
  6. Ecommerce merchants must alert shoppers about any surcharge on the first page that references credit card brands
  7. Merchants must surcharge Visa and MasterCard on the same terms and conditions as any equal or higher cost competitor that imposes limits on surcharging. This may mean that if the merchant accepts a card brand which does not allow surcharging the merchant will not be allowed to surcharge the Visa and MasterCard credit card transactions. Merchants need to review the regulations with their provider.

Be careful of misleading sales tactics and incorrect savings analyses

In 2011 the Durbin Amendment was implemented lowering the debit card interchange rates for most debit card transactions. At that time, I cautioned merchants to beware of misleading sales tactics fostered by the Durbin Amendment. I have seen all of the misleading sales tactics I predicted would take place.

I now caution merchants to beware of misleading sales tactics that will be fostered by this preliminary settlement. Those misleading sales tactics may include:

  1. Salespeople informing merchants that the recent Visa/MasterCard settlement means they now get better pricing from Visa and MasterCard then the merchants current provider so they can offer the merchant a lower rate.
  2. Terminal leases or terminal set up fees to implement the required surcharge notification.
  3. Savings analyses that have some amount of surcharging implemented to enhance the providers projected savings.
  4. Merchants being informed of certain mandates or stipulations that just are not true.


I do not believe this settlement is an automatic win for merchants. Merchants need to fully understand the consequences of surcharging and be on guard for misleading sales tactic as a result of this preliminary settlement.

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