There are many posts here related to cc rates and to offset the fees to customers, that could offer a lot of information.
To sum it up however, surcharge to a customer for using a credit card as a form of payment, is not allowed and it’s illegal.
What’s allowed to do is to offer a cash discount program to those who are paying with cash.
That also must be included in the printed receipt of your POS if you have one. [You cannot offer a cash discount program using a standalone terminal!]
From the VISA website: [https://usa.visa.com/support/consumer/visa-rules.html]
Is a merchant allowed to add a surcharge to the purchase amount for using a Visa card?
In general, no. Surcharging is currently permitted in Australia, Mexico, and New Zealand, and on certain credit card transactions in the U.S.
Surcharging isn’t allowed everywhere in the U.S. Currently, there are laws limiting surcharging in Colorado, Connecticut, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. California’s and New York’s laws limiting surcharging have been enjoined from enforcement pursuant to court orders, but appeals are pending. An order upholding Florida’s law limiting surcharging was reversed on appeal, but remains subject to further litigation. Consumers who are subjected to a surcharge in states where they may be prohibited from surcharging may want to report the retailer to their state attorney general’s office.
State: California
“No retailer…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means…”
Statute: Cal. Civ. Code § 1748.1(a) (West)
Discounts for Cash Payments are allowed in California
“A retailer may, however, offer discounts for the purpose of inducing payment by cash, check or other means not involving the use of a credit card, provided that the discount is offered to all prospective buyers.”
Statute: Cal. Civ. Code § 1748.1(a) (West)
Statutes cover:Credit Cards only
Statute: (Cal. Civ. Code § 1747.02(a) (West) (defining “credit card”))
- California State Attorney General
(*external link implies no endorsement by state of California)
State: Colorado
"[N]o seller…may impose a surcharge on a holder who elects to use a credit or charge card in lieu of payment by cash check or similar means…”
Statute: Colo. Rev. Stat. Ann. § 5-2-212(1) (West)
Discounts for Cash Payments are allowed in Colorado
“Discounts offered to induce payment by cash, check or other means not involving credit card are not finance charges if offered to all prospective buyers and disclosed clearly and conspicuously in accordance with regulations.”
Statute: Colo. Rev. Stat. Ann. § 5-2-212(2) (West)
Statutes cover:Credit Cards only
Statute: (See Colo. Rev. Stat. Ann. § 5-1-301(16), (16.5), (24), (43) (West)).1
Colorado State Attorney General
State: Connecticut
“No seller may impose a surcharge on a buyer who elects to use any method of payment, including, but not limited to, cash, check, credit card or electronic means…”
Statute: Conn. Gen. Stat. Ann. § 42-133ff(a) (West)
Statute: Id. at § 42-133ff(d).
Statute covers:Credit & Debit
No surcharges on travel agents
”No provider of travel services may impose a surcharge on or reduce the commission paid to a travel agent who acts as an agent for such provider if the buyer uses a credit card to purchase such provider’s travel services.”
Statute: Conn. Gen. Stat. Ann. § 42-133ff(e) (West)
Statute does not define credit card to include debit card
Connecticut State Attorney General
Connecticut Department of Consumer Protection
State: Florida
“A seller…may not impose a surcharge on the buyer…for electing to use a credit card in lieu of payment by cash, check, or similar means, if the seller…accepts payment by credit card…”
Statute: Fla. Stat. Ann. § 501.0117(1) (West)
Discounts for Cash Payments are allowed in Florida
Discounts offered to induce payment by cash, check or other means not involving a credit card allowed if offered to all prospective buyers.
Statute: Fla. Stat. Ann. § 501.0117(1) (West)
Statutes cover:Statute does not define credit card to include debit card
Statute: Fla. Stat. Ann. § 501.011(1) (West)
Florida State Attorney General
State: Kansas
“No seller…or any credit card issuer may impose a surcharge on a card holder who elects to use a credit card in lieu of payment by cash, check or similar means.”
Statute: Kan. Stat. Ann. § 16a-2-403
Discounts for Cash Payments are allowed in Kansas
Attorney General’s opinion interprets section 16a-2-403’s predecessor statute to not prohibit discounts for payments made by cash, check or similar means.
Statute: Kan. Op. Attorney Gen. 86-115, 1986 WL 238345 (1986)
Statutes cover:Statutes do not define credit card to include debit card
Statute: (See Kan. Stat. Ann. §§ 16a-1-301(18), (19))
Kansas State Attorney General
State: Maine
“No seller…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.”
Statute: Maine Rev. Stat. Ann. tit. 9-A, § 8-303(2) (See also id. § 8-103 (definitions and rules of construction))
Discounts for Cash Payments are allowed in Maine
Discount offered to induce payment by cash, check or other means not involving a credit card not considered a finance charge if offered to all prospective buyers and disclosed clearly and conspicuously.
Statute: See Maine Rev. Stat. Ann. tit. 9-A, § 8-303(3)
Statutes cover:Credit cards only
Statute: (See Maine Rev. Stat. Ann. tit. 9-A, § 1-301(15), (16)).1
Maine State Attorney General
State: Massachusetts
“No seller…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.”
Statute: Mass. Gen. Laws Ann. ch. 140D, § 28A(a)(2) (West)
Discounts for Cash Payments are allowed in Massachusetts
Discount offered to induce payment by cash, check or other means not involving a credit card not considered a finance charge if offered to all prospective buyers and disclosed clearly and conspicuously.
Statute: Mass. Gen. Laws Ann. ch. 140D, § 28A(b) (West)
Statutes cover:Credit cards only
Statute: (Mass. Gen. Laws Ann. ch. 140D, § 1 (West))
- Massachusetts State Attorney General
(*external link implies no endorsement by state of Massachusetts)
State: New York
N.Y. General Business Law §518
No seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.
Any seller who violates the provisions of this section shall be guilty of a misdemeanor punishable by a fine not to exceed $500 or a term of imprisonment up to one year, or both.
State: Oklahoma
“No seller…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.”
Statute: Okla. Stat. Ann. tit. 14A, § 2-211, -417 (West)
Discounts for Cash Payments are allowed in Oklahoma
Discount offered to induce payment by cash, check or similar means not involving an open-end credit card not considered a credit service charge if offered to all prospective buyers clearly and conspicuously in accordance with regulations.
Statutes cover:Credit cards only
Statute: (See Okla. Stat. Ann. tit. 14A, § 1-301(7), (9), (19)
Oklahoma State Attorney General
State: Texas
“[A] seller may not impose a surcharge on a buyer who uses a credit card for an extension of credit instead of cash, a check or a similar means of payment.”
Statute: Tex. Fin. Code Ann. § 339.001(a) (Vernon)
Statute covers:Credit cards only
Statute: Tex. Fin. Code Ann. § 301.002(a)(2),(9)
Texas State Attorney General
In any case, most customers won’t do anything about it or complain. But it only takes one to cause a problem, and then… good luck.
Just be aware of what you’re getting into, because the sales rep who’s selling the service, will have no responsibility in case of any problems.
All stores that do over 30% of their processing volume in keyed-in transactions eventually they have their account reviewed and their rates go up by a few points. Best option would be to find a processor that offers the option of accepting cards at the door (with a fairly priced solution obviously), so you can keep your keyed-in transactions below 30%.
As for the effective rate, that only applies per monthly statement. It’s never the same each month. The difference is usually minimal since 80% or more of your customers are regulars, but it does change and it depends on the cards used each month.
For example, if you have a lot of transactions from rewards credit cards in a month, the effective rate will be a lot higher from a month with most debit card transactions.
I hope this helps.
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