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Since April 15th, 2023, merchants in the United States are restricted to a 3% cap when surcharging customers who pay with Visa credit cards.

This news has caused quite a stir in the payment processing industry, and in this blog article, we’ll explore what surcharging is, why Visa made this change, and what it means for businesses and consumers alike.

What is credit card surcharging?

Surcharging is when a merchant adds an additional fee to a customer’s credit card purchase to cover the cost of the credit card processing fee.

Similar to how you see other fees such as “Supply Chain Fee” or “Employee Wellness” but instead surcharging is directly targeted at reducing the cost of merchant services fees.

This is commonly also marketed as “Cash-Discount” or “Zero-Fee” processing. Although at the end of the day, it is not “Zero-Fee” since there is still a processing fee but instead that amount is passed onto the merchant.

Credit Card Surcharge Laws by State

It is important to note that surcharging is not legal in all states or countries, and there may be restrictions on when and how it can be applied.

As of 2023, only two states and one US territory still prohibit credit card surcharging. In the following jurisdictions, you can not impose surcharges:

  • Connecticut
  • Massachusetts
  • Puerto Rico

In these other states, anti-surcharging laws remain on the books but are unenforceable due to recent court decisions:

  • California
  • Florida
  • Kansas
  • Maine
  • New York
  • Oklahoma
  • Texas
  • Utah

Changing Visa Surcharge Rule Effective April 15th, 2023

Visa is making significant surcharging changes that will take effect on April 15th, 2023 including:

  1. Merchants will only be required to notify their acquirers, not Visa, 30 days in advance of commencing surcharging.
  2. The maximum amount for a credit card surcharge in the U.S. and the U.S. Territories will be lowered from 4% to 3%

“Clients are reminded whenever a surcharge is assessed, the surcharge amount must be populated in Field 28 — Amount, Transaction Fee, which Visa will now consider to be the notification of the surcharge. Moreover, clients are also reminded that surcharges are only permitted on credit cards and in the U.S. States, U.S. Territories, or Canadian provinces where surcharges are not prohibited by local law. Visa will continue to monitor the assessment of surcharges and will implement compliance action when violations of the Visa Rules are identified.” (Paya)

What Businesses Should Do Because of the Visa Surcharge Changes

Businesses that accept Visa payments, especially those that are just starting to become more familiar with surcharging options, will need to be aware of these changes and make adjustments to their surcharging practices accordingly. To navigate these changes successfully, businesses will require the assistance of a trusted advisor who can provide them with the necessary guidance and support.

That’s where the Evolve Payment’s merchant services team comes in. Our team has the expertise and experience needed to help businesses understand these new Visa surcharging rules and make the necessary adjustments to their payment processing systems.

The Evolve Payments team can provide value by helping businesses avoid costly mistakes and ensure compliance with the new regulations.

These changes are critical as they will impact businesses across the board. Surcharging is an essential part of many businesses’ payment processing strategies, and the new regulations will require adjustments to existing systems.

Businesses that do not comply with the new regulations coming down the pipeline on April 15th, 2023 risk facing fines and penalties or even worse; their merchant services account being shut down due to non-compliance.

Credit Card Surcharging Q&A

A payment card surcharge, also known as a checkout fee, is an additional fee that a merchant adds to a consumer’s bill when someone uses a card for payment.

U.S. merchants must first notify Visa and their acquirer of their intent to surcharge at least 30 days prior to implementing surcharging. Merchants can submit a notification form to Visa at www.visa.com/merchantsurcharging.

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
  • Cost of credit card processing and other forms of payment
    • Evolve Payment can help guide you through your Accounts Receivable Process

U.S. merchants that intend to surcharge are required to:

  • Notify Visa and your acquirer at least 30 days in advance of beginning to surcharge; a notification form to Visa can be submitted at www.visa.com/merchantsurcharging.
  • Limit surcharging to credit cards only (do not surcharge debit and prepaid cards)
  • Limit the amount to your merchant discount rate for the applicable credit card surcharged
    • Effective April 15th, Visa’s surcharging cap is 3%
  • Disclose the surcharge as a merchant fee and clearly alert consumers to the practice at the point of sale – both in-store and online – and on every receipt.
  • Merchants should also consider whether they comply with all applicable state or federal laws

Yes, U.S. merchants may implement a surcharge on credit card purchases as long as it does not exceed the merchant discount rate for the applicable credit card. With the changes occurring on April 15th, 2023, the maximum surcharge rate for Visa is 3%.

Yes, however, merchants must surcharge Visa on the same terms and conditions as any equal or higher cost competitor that imposes limits on surcharging.

Yes. U.S. merchants that surcharge must disclose the surcharge dollar amount on every receipt. In addition, disclosures that a merchant outlet assesses a surcharge on credit card purchases must be posted at the point of entry and point of sale. Disclosure requirements and sample compliant signage can be found at www.visa.com/merchantsurcharging.

No. If a merchant is prohibited from surcharging in one state, Visa’s surcharge rules do not prevent the merchant from surcharging in other states that allow the practice.

Is your surcharging process compliant?

In summary, the surcharging changes for Visa happening on April 15th, 2023, are significant, and businesses need to be aware of and comply with them to avoid penalties. Trusted advisors, such as Evolve Payment, can provide value and assistance with navigating these changes successfully.

If you are seeking advice on how to navigate the upcoming changes, the team at Evolve Payment is ready to answer questions, introduce solutions, and create partnerships in the merchant services space.