Credit Card Surcharges are Legal – Now What?
It’s making national headlines but the jury is still out as to whether legalizing credit card surcharges will make much of a difference in the current market. Currently, ten states (including New York and California) have shot down the ruling, but in the remaining forty, credit card surcharges might be passed along to consumers who are already feeling the strain of tough economic times.
Until recently, merchants who offered consumers the option to pay by credit were obligated to pay a small interchange fee. That interchange fee typically amounted to two or three percent of each transaction. It came out of the merchant’s pocket and went straight to the credit card company or account provider. In other words, companies that chose to offer customers the convenience of paying by credit card had to eat the fees associated with it. That’s why at many small businesses you’ll see a sign that says customers must spend at least $10 to have the privilege of paying by card. This prevents customers from charging multiple small purchases and having x% of the purchase going to the bank. For little things, most small businesses prefer if customers use cash so there is no financial intermediary; rather, the cash goes straight to the business.
So does all this mean big changes are coming for merchant account providers like HighRiskPay.com? Not necessarily.
It’s likely that account providers will stay out of this new drama and let merchants handle it on an individual basis. While small business owners and vendors are now legally allowed to charge consumers the extra amount that credit card companies charge them, that could have the negative effect of limiting spending. That’s the last thing a small business wants to happen. So, even though it’s permitted (in most states) it won’t necessarily happen everywhere.
The good news is that small businesses who are currently paying two or three percent per transaction to their merchant account providers, can now technically offload those fees onto consumers.
If a small business was struggling to pay their bank or merchant account provider, this new ruling could mean the difference between staying profitable and going under.
For more information about the ruling and to see if surcharges are legal in your state, click here.