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Credit Card Surcharge Legal, But Will It Cost You?

By Tanya Roth, Esq. on January 28, 2013 | Last updated on March 21, 2019

Small businesses are feeling the effects of the recent credit card antitrust settlement. As of Jan. 27, 2013, most merchants that accept credit cards can add a surcharge when customers pay by credit card, Time magazine reports.

This is in accordance with the terms of a $7.4 billion settlement that came about last year, between the card companies and merchants.

Going forward, merchants are now allowed to impose up to a 4 percent surcharge on customers' credit card transactions in the 40 states where such surcharges are legal.

But could imposing a surcharge cost you your customers?

That's a tricky question.

The credit card settlement involved so-called "interchange fees" between the merchants and the card companies. So, what the new rule allows is for merchants to pass along the costs of conducting the credit card transaction directly to consumers via a credit card surcharge.

For small businesses, this isn't a win-win. Sure, a small business can recoup the costs of credit card transactions by doing this. But a small business retailer will have to make it really obvious to customers that it's imposing a surcharge, according to the settlement's terms.

Any merchant imposing the credit card surcharge must post notices -- at the checkout, on their storefront, and on the customer's receipt as well.

Those notices have the potential to dissuade customers from using their credit cards -- or worse, from shopping at your store. This is especially true as many of the nation's largest retailers have indicated no plans to add the surcharge, accoridng to the New York Dailly News.

But merchants and consumers in 10 states likely won't see any credit card surcharges. They're illegal under state laws in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.

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