Merchant Surcharging

A surcharge, sometimes referred to as a checkout fee, is an additional fee that a merchant adds to a consumer’s bill when he or she uses a card for payment.

U.S. merchants have the option of adding a surcharge to credit card transactions. However, merchants must decide if they want to surcharge at the “brand level” or the “product level,” but not both. A brand level surcharge applies the same surcharge to all credit card transactions for a particular brand (Visa or MasterCard). A product level surcharge applies to a particular type of Visa or MasterCard credit card (e.g., Visa Signature, Visa Signature Preferred, World Elite MasterCard).

Yes. Surcharging continues to be prohibited on debit and prepaid card transactions. With debit transactions, surcharging is prohibited on all transactions, regardless if they are run as debit or credit.

No. Surcharging debit and prepaid card transactions is prohibited. With debit transactions, surcharging is prohibited on all transactions, regardless if they are run as debit or credit.

• The surcharge must be the same for all credit card transactions of that brand, regardless of issuer.

• The surcharge must be no greater than the merchant’s average discount rate for that brand’s credit card transactions.

• The surcharge cannot exceed 4% in any event.

• For merchants that accept multiple brands of credit cards, additional requirements apply (see below).

For U.S. merchants that accept credit or charge cards from other payment network brands, including American Express, Discover and PayPal, surcharging practices are subject to a competitive “level playing field” limitation.

If the merchant accepts a competing payment network brand (e.g., MasterCard) that is as or more expensive to the merchant than another brand (e.g., Visa), the merchant may surcharge one brand’s (MasterCard’s) credit card only in the same way as the merchant would be allowed to surcharge the competing payment network’s (Visa’s) credit card.

If the merchant accepts a competing payment network brand of credit card that prohibits the merchant from surcharging in a particular channel of commerce (i.e., either face-to-face or non-face-to-face), the merchant may not surcharge one brand’s credit cards unless it also surcharges the competing payment network’s credit cards regardless of the cost of that card to the merchant. In this case, the amount of the surcharge on the competing brand must be at least the lesser of the cost to accept the competing brand’s credit cards or the surcharge imposed on the first brand’s cards.

Yes. Visa and MasterCard require that merchants who decide to surcharge credit card transactions must satisfy the following notification and disclosure requirements.

• The merchant must provide 30 days advance written notice to Visa, MasterCard and the acquirer.

• The merchant must provide clear disclosure to its customers that it is imposing a surcharge, including the amount, and that the surcharge is not greater than the merchant’s discount rate.

• The dollar amount of the surcharge must be provided on the transaction receipt.

• In addition, MasterCard and Visa also now require that the surcharge amount be included in the transaction that is sent to MasterCard and Visa. As a result, merchants are effectively required to have a credit card terminal or other POS system that can provide the transaction surcharge as part of the credit card transaction.

Yes. Merchants who surcharge must provide clear disclosure to their customers:

• At the point of store entry

• At the point of interaction or sale with the customer

• If online, disclosure must be on the first page that references credit card brands

• The transaction receipt must disclose the dollar amount of the surcharge

A merchant can satisfy its disclosure obligation to Visa and MasterCard by completing the web forms for each card brand below.

• MasterCard Web Form

• Visa Web Form

Each card brand requires that the merchant provide disclosure by completing the web forms 30 days prior to beginning to surcharge cardholders. Note: The merchant must also notify the processing network of their intention to begin surcharging cardholders (see below).

Merchants who choose to surcharge must notify their processing network 30 days prior to beginning to surcharge. Please contact us so we can obtain the necessary disclosure documentation from the processing network.

The settlement agreement required Visa and MasterCard to provide a written notification to their merchants. More information can be found at the links below:

Visa Merchant Communication

MasterCard Merchant Communication

Yes. It is important that you contact a legal advisor to confirm that you can apply a surcharge on credit card transactions in your state, and to ensure that you comply with any other applicable state and local laws pertaining to surcharging.

Visa has created numerous resources on this topic, including Frequently Asked Questions and other documents that can help merchants decide if they should surcharge their customers. These resources can be found at www.visa.com/merchantsurcharging.

MasterCard also provides additional information on its website at https://www.mastercard.us/en-us/merchants/get-support/merchant-surcharge-rules.html

Before choosing to surcharge, U.S. merchants may want to consider a number of factors,including:

• The potential impact on your customers’ experience

• What your competitors might be doing

• What information must be disclosed to your customers, and how

• Cost of credit cards and other forms of payment