By Attorneys, Kelly McCall and Michelle Anderson Fisher & Phillips
Credit card swipe fees have been a thorn in the side of businesses and consumers alike. Businesses, including restaurants, pay credit card networks (such as Visa, AMEX and Mastercard) to allow them to accept credit card payments for purchases. Some businesses choose to pass this fee on to the consumers – a surcharge. Are these surcharges legal? If so, how should your restaurant protect itself while utilizing credit card surcharges? What is a credit card surcharge? A credit card surcharge is a way for businesses to have their customers who pay with a credit card cover the processing costs for accepting those credit card transactions. These surcharges typically range from 1.5 to 4 percent of the transaction amount. Credit card surcharges are not the same as convenience fees. Convenience fees are charges passed on to customers for the privilege of paying for a product or service using an alternative payment method that is not standard for the business. For example, a business that traditionally accepts cash or checks but also offers credit card payments or the use of banking apps (PayPal, Zelle, Venmo) for convenience, might charge an additional fee for that convenience. Another example of a convenience fee is a restaurant offers curbside/take-out or delivery, it charges a convenience fee for these services, that it does not charge for in-person dining. The convenience fee is charged not for using a credit card, but for the privilege of accessing the services for take-out or delivery. Is it legal? A United States Supreme Court ruling in 2017 protected surcharges as a form of free speech from merchants. That does not, however, limit states from imposing restrictions. There are at least ten states that prohibit surcharges (and some convenience fees). Louisiana is not presently one of those states. Businesses can also require a minimum purchase amount when a credit card is used, under the Dodd-Frank Wall Street Reform and Consumer Protection Act. The minimums cannot be more than $10, and the minimum cannot be set higher than what other merchants in the same card network use. Rules for credit card surcharges There are rules for businesses to follow when it comes to credit card surcharges. If your restaurant is using credit card surcharges, then you must do the following: · Check with your credit card network for any requirements or restrictions · If doing business outside of Louisiana, check state law · Clearly disclose the fact that there is a surcharge before the transaction · Display the credit card surcharge on the receipt · Keep surcharges below 4% of the transaction, or the amount of the fees the merchant pays to the credit card companies, whichever is less Keep in mind, surcharges are only allowed for credit card purchases – not debit card or preloaded gift card transactions. Should you use a surcharge? Accepting credit cards costs restaurants more in comparison to cash. Processing fees and expenses like card readers and point-of-sale systems quickly add up, especially for small business owners. Consumers, however, are becoming overrun with fees. In some instances fees are costing almost as much as the meal itself. Businesses should evaluate the pros and cons and weigh that small profit against the potential profit loss from turning away some customers due to the surcharges. This is particularly true if other establishments in your local area are not including surcharges for accepting credit cards. Evaluate whether there is another way to cover the costs through pricing of your products and services versus having the additional charge on the bill. As with many things in business, just because you can is not necessarily the same answer as whether you should. For more information contact the authors at Kmccall@fisherphillips.com or Manderson@fisherphillips.com
17 Comments
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3/3/2023 09:20:15 am
The convenience fee is charged not for using a credit card, but for the privilege of accessing the services for take-out or delivery. Thank you for sharing your great post!
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3/3/2023 09:37:49 am
Businesses should evaluate the pros and cons and weigh that small profit against the potential profit loss from turning away some customers due to the surcharges. Thank you, amazing post!
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7/10/2023 11:04:37 am
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7/18/2023 12:40:27 pm
The convenience fee is charged not for using a credit card, but for the privilege of accessing the services for take-out or delivery. Thank you for the beautiful post!
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7/27/2023 01:00:04 am
Both the LRA website's article "Credit Card Surcharges: Are They Legal?" explores the legality of credit card surcharges and offers insightful information about consumer rights. Best Kids Debit Card The site does a good job of outlining all sides of the debate and invites readers to comment with their thoughts.
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11/3/2023 01:35:16 am
Credit card surcharges have long been a topic of debate among businesses and consumers, and it's essential to understand their legality. Many businesses, from small retailers to restaurants, incur swipe fees when customers use credit cards for payments. Some of these businesses opt to pass these fees on to consumers in the form of a surcharge. Whether these surcharges are legal or not depends on various factors, including state laws and credit card network regulations. It's crucial for businesses to navigate this complex landscape carefully to protect themselves while implementing credit card surcharges.
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11/4/2023 12:41:26 am
I've always been curious about the legality of credit card surcharges, especially when it comes to restaurants. It's essential for businesses to have a clear understanding of the laws surrounding these surcharges to avoid any potential legal issues. From what I've heard, some states have specific regulations regarding surcharges, while others allow them with certain restrictions. I hope the article by Kelly McCall and Michelle Anderson provides some clarity on this topic and offers guidance for restaurants on how to navigate this tricky territory.
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11/5/2023 07:03:52 pm
I think credit card surcharges can be a bit of a double-edged sword for businesses. On one hand, they help cover the costs associated with processing credit card transactions, which can be quite substantial. On the other hand, customers may not always be happy about paying these surcharges. It's important for businesses to strike a balance and ensure that they are complying with the law when implementing surcharges. That way, they can protect themselves from legal issues while also offering the convenience of credit card payments to their customers.
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11/11/2023 12:02:38 am
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11/29/2023 09:47:30 pm
This blog post brings up an important point about protecting restaurants while using credit card surcharges. I think it's crucial for both businesses and consumers to understand the legal aspects of these surcharges.
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