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Is It Legal to Charge a Fee for Using Credit Cards?

By Brett Snider, Esq. | Last updated on

Businesses often charge a fee for using credit cards, and although consumers may hate it, the practice is legal.

The cost of making most transactions via credit card (interchange fees) can add up, and businesses can legally pass those costs on to the consumer via a credit card surcharge. But you need to be careful about how that fee is added.

So how can your business legally charge customers for using credit cards?

Be Honest With Fees

Beginning in January 2013, as part of a settlement between major credit card companies and merchants, small businesses were allowed to charge extra for customers who use credit cards.

The settlement did set some rules for charging this sort of fee. Businesses adding on a credit card surcharge must:

  • Give customers notice at checkout. This may be in the form of a clear written notice and/or a verbal notice of an extra charge for using a credit card.
  • Disclose surcharge on receipt. A small disclaimer of the amount added for credit card fees may suffice.
  • Post notice at the door. Just in case these notices don't give your customer the picture, a notice of your surcharge practices should be posted at your door.

Enforcement of these notice rules may be spotty, but the ethos is clear: be honest with your customers about your credit card surcharges.

Surcharge Cap

Both Visa and Mastercard allow merchants to charge up to 4 percent per transaction for customers using their credit cards to make purchases. This means that a $2 surcharge on a $8 purchase is not likely to be legal.

In addition, at least 10 states have disallowed these kinds of surcharges, reports TIME. So if you're a business owner in New York or California, credit card fees may be out of your reach.

Can I Offer a Discount for Cash?

Even if you are in a state which frowns on credit card surcharges, you may be able to offer a discount for cash ... if you run a gas station. According to The Courant, gas stations have been allowed to offer discounts for cash and debit where many other businesses cannot -- despite the fact that it looks like a credit surcharge.

Other small businesses may wish to use a cash discount system, but it may give the appearance of "under the table" transactions.

Need help figuring out your credit card policy? Speak with a business attorney to better understand your options.

Editor's Note, May 17, 2016: This post was first published in May 2014. It has since been updated.

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