It is legal to charge a credit card processing fee in 40 out of 50 states if it’s a surcharge and in all states if it’s a convenience fee. A surcharge is an added cost just for using a credit card, while a convenience fee is a charge for doing a transaction that’s unusual for the merchant (e.g. over the phone). You’ll usually have to pay convenience fees on things like taxes and tuition, too. Credit card networks also restrict the cases where fees are acceptable. For example, businesses must clearly display any surcharges or convenience fee before a transaction takes place. In other words, they can’t add it on without your knowledge.
Here’s what you need to know about the legality of credit card processing fees:
• There are two types of processing fees: convenience fees and surcharges.
• Convenience fees are for doing a credit card transaction in a way that’s not typical for the business (e.g. over the phone when they usually accept in person).
• A credit card surcharge is a fee just for using a credit card instead of another payment method.
• 10 U.S. states outlaw credit card surcharges: Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.
• Merchants must always clearly disclose both types of credit card processing fees at the point of sale. If they add one without your knowledge, you should call your credit card network to complain.
• Merchants are allowed to charge no more than 4% of the purchase amount or the actual cost of processing your card, whichever is lower.
Battles about surcharges have even gone to the Supreme Court, which upheld New York’s right to ban them. Be sure to look up your state’s policy. You should also know that if you get a refund on a purchase for which you had to pay a surcharge, you get your surcharge money back too.