Can a Small Business Charge a Credit Card Fee?

Legality

A number of state governments don’t allow businesses to introduce credit surcharges. As of 2019, they include Maine, New York, Florida, Colorado, Oklahoma, Massachusetts, Texas, Kansas and Connecticut. The same goes for Puerto Rico.

Even if your state permits you to charge cardholders an extra fee, the network may forbid it. Companies like American Express and Visa usually only let merchants add surcharges to online, kiosk or phone payments. They enforce particularly restrictive rules regarding debit and prepaid cards.

Alternatives

If you can’t recoup processing costs with a fee, you could set a minimum purchase amount for card users. Federal law caps this threshold at $10. The new policy may alienate a few customers while encouraging others to spend a bit more. Some retailers have set a $5 spending requirement.

Be sure to follow the card network rules if you establish a threshold. Visa will allow you to set a minimum, but you cannot apply it to debit transactions. Most major networks won’t let you enforce separate rules for different types of credit cards.

Another option is to provide a free bonus or discount to patrons who pay in cash. State laws in Colorado, Maryland, Wyoming, Washington, Oklahoma, Wisconsin, Nevada, Connecticut and Massachusetts specifically allow cash discounts. No states have banned them.

Small business owners can also choose to simply educate customers about card processing expenses and encourage them to make cash payments. Mention that it helps you keep prices low. You could post a notice on your bulletin board or publish it in a food menu.

To sum it up, state laws and card network policies bar businesses from levying credit surcharges in most situations. The rules about minimum purchase amounts and cash discounts aren’t as strict. These solutions also have more positive connotations and may hold greater appeal for customers.

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