You’re about to give your credit card to make a payment when the merchant says, “Credit card transactions are an extra 3%.”

 

This is called a credit card surcharge. Though it’s annoying, there’s a reason merchants add it: to cover their costs. You’ll rarely see surcharges at large retailers. But you could see them at mom-and-pop establishments, where bottom lines are more sensitive to credit card processing fees.
Is it legal for the merchant to charge you an extra surcharge?

In most States, merchants aren’t barred by law from adding surcharges. According to the Durbin Amendment of the Dodd–Frank Act, retailers are allowed to add a surcharge on credit card transactions. (They are not allowed to add surcharges on debit card or prepaid card transactions.)

 

Merchants are also allowed to require minimum purchases for credit card purchases — up to $10.

 

However, Surcharges are illegal across the board in these 9 states:

Colorado

Connecticut

Florida

Kansas

Maine

Massachusetts

New York

Oklahoma

Texas

 

Does it make sense for you to pay an extra 3% to use your credit card?

That really depends on why you wish to use your credit card in the first place. If it’s simply for convenience, it might not make sense for you to pay an extra 3% for this convenience. However if you need the 30 – 45 day cash float that your credit card afford you, then it might be the only way you can make the purchase. Additionally, some savvy business owners may have a credit card that earns them 2% cash back and the cash back money is tax free (grey area…Speak to your Accountant.). If you’re in a high tax bracket, it may be well worth it to pay 3% and get back 2% of that tax free.

 

Does it make sense for business owners to pass on the fee?

It really comes down to your customers. If you implement a surcharge, it comes at the risk of losing customers who are put off by additional charges for credit card.

 

When consumers were asked would they pay extra to use a credit card at a business, 64% said they wouldn’t pay an extra fee. Additionally, credit cards have become a standard method of payment in virtually every industry and every large corporation accepts credit cards without surcharging.

 

Finally, if your fees are too high, it might be time to look for a new processor. If you’re already a Banquest client, let us know how we can help you when it comes to surcharges. If you’re not a client but interested in how we can support your business, click here to contact us today!

 

It’s our mission to reduce the costs and headaches associated with credit card processing, so we’d be honored to earn your business.
Happy Tuesday & Happy Selling!
Kevin

I debated with myself before writing this blog: is it really necessary? Is there anyone out there that doesn’t already know this information?

 

Unfortunately we and our colleagues in the payment processing industry deal with this all the time. My staff, who unfortunately has to clean up these messes, insist that many of the abusers are truly innocent. They simply don’t know that what they are doing is wrong.

 

What I am referring to is the practice of charging or swiping ones own credit card to their own business – as a quick way to get funds into their bank account. (i.e. a business owner is short $20,000 for payroll, so he swipes his own credit card for $20,000 and has the funds in his account the next day! Sometimes there may even be legitimate reasons for doing so such as when someone owns multiple businesses and he is using his card from business A to pay business B.)

 

I’m not here to discuss whether or not this is a financially good idea in terms of the % rate… (It’s not!)

 

The credit card processors strictly prohibit such transactions and will terminate any account that processes such a transaction. They’re pretty good about catching them too. Sometimes the processor will place the merchant on a blacklist that is shared with all US processors ensuring that this business will never get approved for a merchant account anywhere.

 

In short: never charge your own (or your family or business partners) credit card to your own merchant account.

 

Happy Tuesday & Happy Selling!
Kevin