Beware of upcoming credit card surcharges

Beginning Sunday, retailers accepting credit cards in the United States can charge customers a surcharge for the “privilege” of using a credit card. This surcharge is a result of a class-action suit brought against credit card companies in 2005. The new surcharge can be as high as four percent of the purchase. Historically, credit card companies have prohibited retailers from passing on the cost of processing to cardholders.

Thankfully, there are some stipulations:

  • Retailers cannot charge more than what processing the transaction actually costs.
  • Customers must be informed of the surcharge before transaction is made.
  • The receipt must clearly show the actually dollar amount of the surcharge as a separate line item and it must be made clear that this surcharge is being charged by the retailer and not the credit card company.
  • Retailers cannot charge a surcharge on debit card purchases. If a customer enters a PIN number, there can be no surcharge. If a debit card is processed as a credit card, there can be a surcharge.
  • Pre-paid credit card transactions are exempt from surcharges.
  • Retailers are prohibited by state law from charging a credit card surcharge in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.

I’d be surprised if more states don’t pass similar laws banning the practice of charging a surcharge on credit card transactions. Since the practice was always banned by the credit card companies, there never really was a reason for these laws to even be on the books. Starting this Sunday, that all changes.

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