Surcharging FAQs

Most Frequently Asked Questions About Surcharging

Q: What is a credit card “surcharge”?
A: A surcharge is a fee added to the customer’s purchase cost for the “privilege” of using a credit card. A surcharge is a percentage of the value of the sale and is typically used to cover the cost of the merchant service charge.

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Q: Why surcharge credit card transactions?
A: Merchants may choose to add surcharge fees in order to recuperate some of their processing fees.Before deciding to implement a surcharge, merchants should consider the following:
1. The potential impact on customers’ experience
2. What competitors might be doing
3. What information must be disclosed to customers, and how.

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Q: Is there a limit to the surcharge fee?
A: Yes, the maximum surcharge fee is 4% of the total amount per transaction. Merchants are not allowed to charge more than 4%.
Example: on a $10 transaction, maximum surcharge fee is 40 cents.

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Q: Are ALL merchants allowed to add surcharge fees to credit card transactions?
A: No, surcharging is prohibited in 10 states. Merchants in the following states may NOT implement surcharging:
1.California
2.Colorado
3.Connecticut
4.Florida
5.Kansas
6.Maine
7.Massachusetts
8.New York
9.Oklahoma
10.Texas.

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Q: Is a merchant allowed to surcharge Debit or EBT transactions?
A: No. Surcharging is prohibited on PIN debit and EBT transactions.

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Q: Do we have a terminal that offers surcharge feature?
A: Currently, Cpay’s PAX S80 is the only terminal that offers the credit surcharge feature. PAX S80 is eligible for the Free Terminal Program (FTP), and has a breakeven cost of $200.

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Q: What are the merchant requirements for credit surcharging?
A: 1.Merchants are required to notify Central Payment and all credit card brands at least 30 days in advance of beginning to surcharge.
2.Merchants need a capable terminal (PAX S80)
3.Merchants may only surcharge credit card transactions; merchants may not apply surcharges to debit or prepaid card transactions.
4.The surcharge cannot be greater than the merchant’s average discount rate for that brand’s credit card transactions.
5.The maximum surcharge allowed is 4%.
6.Cardholders must be notified of the surcharge.There must be proper signage informing cardholders about surcharges.
7.The surcharge must be listed on the receipt as a line item.
8.The surcharge and the primary payment amount must be processed together as one transaction.

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Q: How is a “convenience fee” different from a surcharge?
A: A convenience fee is charged for the “convenience” of being able to pay using an alternative payment channel outside the merchant’s customary payment channel. Any merchant can charge a convenience fee IF the fee charged is for the legitimate convenience of being able to pay using a different payment channel than the merchant’s usual payment channel.
Example: A movie theater’s customary payment channel is face-to-face. If the theater provides an alternative payment channel, such as the option to pay by phone using a credit card, that theater could then charge a convenience fee along with the ticket payment.The general rules for convenience fees are as follows:
1.The customer must be notified of the convenience fee prior to finalizing payment and given the opportunity to cancel.
2.The payment must take place through an alternative payment channel.
3.The fee can only be added to a non face-to-face transaction.
4.The fee must be flat or fixed, regardless of the value of the payment due.
5.The fee must be applied to all means of payment accepted through the alternative payment channel.
6.The fee must be included in the total transaction amount.