Approved Surcharging Practices

What is a surcharge?
Surcharges are fees that a merchant adds to the cost of a purchase when a customer uses a charge/credit card to cover the cost of the merchant service charge. A surcharge is a percentage of the value of the sale. For example, if a cardholder purchases $100 in office supplies, a merchant may add a surcharge of 3% to the total purchase.

Are surcharges legal?
As a result of a settlement between a class of retailers and the brands Visa and MasterCard in November 2012, merchants in the United States and U.S. Territories are permitted to impose a surcharge on cardholders when a charge/credit card (not debit or pre-paid card transactions) is used.  However, surcharges are prohibited in many states by state law. States prohibiting surcharging are: CO, CT, KS, ME, MA, NY, OK and TX. There are specific brand (Visa/MasterCard) rules regarding surcharges and the merchant must assess the surcharge in a manner that is compliant with the standards that have been modified in accordance with the settlement agreement.

Why would I try to charge customers fees or require minimum purchase amounts?
Typically, merchants charge fees or require minimum purchase amounts to cover the cost of interchange. Interchange is a fee paid by the merchant’s bank to the card issuing bank for processing credit card transactions. This fee is generally a percentage of the total transaction amount and is passed on to the merchant through the merchant bank’s fees.

What is required for me to begin charging surcharges?
Each merchant will have to make a decision regarding how the imposition of a surcharge may impact its consumers and the competitive position of the merchant in its market.  Merchants will also have to decide whether to apply the surcharge only on certain items, like cash advances, or whether to impose it across the board.  Each merchant will have to make its own business decision regarding the use of surcharges.

  • The surcharge may not be greater than the merchant’s average discount rate for the preceding month or 12 months and cannot exceed 4%.
  • Brand level surcharges must be the same for all Visa & MasterCard Credit card transactions.
  • Product level surcharges must be the same for all Visa & MasterCard Credit card transactions on each type of card (ie: Visa Signature Preferred, MasterCard World Elite…)
  • Merchants who surcharge and accept credit cards other than Visa & MasterCard are subject to a competitive “level playing field” limitation. The merchant may surcharge credit cards only in the same way as allowed by the competing credit card network brands.  If the merchant accepts a competing credit card network brand that prohibits surcharging in a particular channel of commerce (ie: face-to-face or non-face-to-face), the merchant may not surcharge Visa & MasterCard Credit cards taken in that same manner.
  • Ensure that signage is clearly disclosed at the merchant’s point-of-entry (in store or online) and/or point-of-transaction (payment location or check out page).
  • Ensure that the surcharge amount is referenced separately on the front of the receipt, after the subtotal (allowing for any discounts) and before the final transaction amount.

Prior to imposing a credit card surcharge, merchants must provide a 30-day written notice to Visa and/or MasterCard and UMPA of their intent to add a surcharge. Notification can be submitted via:

Visa:  https://usa.visa.com/support/small-business/regulations-fees.html#2
MasterCard: https://www.mastercard.us/en-us/surcharge-disclosure-webform.html#contentpar_text
Discover: via email at info@umpa-us.com (UMPA will process Discover request)
UMPA: via email at info@umpa-us.com

Should I impose surcharges?
Deciding to implement surcharge fees isn’t easy. Before deciding whether or not to surcharge, consider the surcharge fees through the eyes of your customers and carefully consider whether those fees will make up for any loss in revenue. Remember: this is not a mandatory practice, but if you decide to do so you must continue to respect a cardholder’s decision to pay with Visa and/or MasterCard Credit cards.

If you are not sure what your surcharge would be or to have more questions on surcharging guidelines, please contact us directly at (717) 832-0730.