In January of 2013, Visa and MasterCard updated their operating regulations to allow merchants to pass the costs of accepting credit cards on to their customers. This pass-along cost is called “surcharging” or a “checkout fee.”
Integrity can help you virtually eliminate the fees you pay to accept credit cards through our surcharging support program. There are several steps you must take to remain in compliance with the card brands, and other considerations you should take into account when deciding to surcharge.
Surcharging can help you improve your business’s profitability by greatly reducing your cost to accept credit cards. Surcharging allows you to pass through all of the fees you pay to accept payments from your customers including Interchange fees, Visa FANF, and others.
There are four main rules for merchants who choose to surcharge:
- Merchants must display a clear sign at the point of entry and the point of sale indicating that they surcharge. (Integrity merchants have signage available in the Information Center of our Online Portal.)
- The surcharge amount must be disclosed on every receipt.
- Surcharging can only be applied to credit cards (as a percentage) OR PIN debit cards (as a flat fee). Surcharging may not be added to signature debit cards.
- Merchants must notify Visa, MasterCard, Discover, and Integrity (your processor) 30 days prior to applying surcharges to transactions.
If you choose to surcharge, there are some considerations to take into account:
- What can I surcharge? In the US, you may only add a surcharge to credit OR PIN debit transactions. You may not add a surcharge fee to signature debit or prepaid cards.
- Is surcharging permitted in my state? There are several states which have enacted bans on surcharging. If you live in one of these states, you will not legally be allowed to surcharge your customers. As of 2016, they were as follows:
- *For New York a merchant cannot add a percentage to the sale. They must have a cash and credit price published.
- How much can I surcharge? Your surcharge fee may not exceed the cost of accepting the credit card, and may never exceed 4%.
- How do I calculate my surcharge rate for credit cards? Surcharge rates can include the Interchange rate, set network fees associated with processing the transaction, network fees associated with the acceptance of the network’s brand, acquirer set processing fees associated with the transaction , and any other service fees paid to the acquirer via the mechanism of the per transaction merchant discount. Fees that are invoiced separately or not paid via the transaction fees are NOT allowed (example: the cost of a point of sale system or terminal).
- What is the difference between convenience fees and surcharging? A convenience fee should only be charged by merchants that offer their primary payment in person and as a convenience, offers their customers payment options via phone or website (example: at a movie theater, a cardholder typically makes a purchase while present at the theater, but they can make purchases via phone or internet. The theater could apply a convenience fee for cardholders who wish to pay via phone or internet in this instance.) Convenience fees must be a flat fee. Surcharging applies to cards used at the merchant’s business.
- Do I need to make any changes to my hardware? Because the surcharge must be noted on the receipt and the terminal or point of sale system will need to add it to the price of purchase, your terminal or point of sale hardware may require updates. If you have a point of sale system, you will need to work with your reseller or technical support to see if surcharging is supported. At Integrity, we support surcharging through terminal hardware as well, but the software that runs your terminal may need to be updated in order to add the surcharging function.
If you do want to surcharge, you will need to notify Visa, MasterCard, Discover and Integrity 30 days before you begin. Integrity can help you update your terminal and receipts to accommodate the notifications, and set you up with the proper signage.