Effective January 27, 2013 merchants in the U.S. region and U.S. territories have the option of adding a surcharge to Visa and MasterCard credit cards. Yet despite the media hype over these recent changes allowing merchants to charge up to a 4% surcharge on credit card transactions, the reality is few merchants are expected to implement additional fees at the point of sale.
Most merchants will likely take a wait and see approach before contemplating adding surcharges, letting their closest competitors try it first.
Another issue is that new application software to support surcharges has not yet been widely developed. One of the many stipulations if a merchant chooses to implement surcharge fees is that they must use a payment application which supports the following mandated POS functionality:
- POS application must capture the Surcharge Fee separately from the Purchase (Sale) Amount within the request message to the Host (Processor).
- POS application receipts (merchant and cardholder copies) must print both the Sale (Purchase) Amount and the Surcharge Amount (Fee).
The processor host must develop, support and publish technical specs to terminal manufacturers, POS and payment gateway providers who must then update their payment solutions. Given EMV requirements are already consuming development resources, meeting these additional surcharge functionality requirements is going to take time and will likely be rolled into EMV development efforts.
Merchants must also adhere to these additional requirements:
- Merchants must first notify Visa, MasterCard and their Acquirer of their intent to surcharge at least 30 days prior to implementing surcharging. You may notify Vantage by emailing us at email@example.com. Merchants should submit notifications to Visa at www.visa.com/merchantsurcharging and to MasterCard at www.mastercardmerchant.com.
- Surcharge fees must not be more than the merchant’s effective discount rate. To meet this requirement, merchants will need to calculate their average effective real rate for the preceding one to twelve months with the maximum surcharge cap being 4%. Vantage clients can use PayView to look up their effective real rate.
- Implement surcharges in a manner which ensures a level playing field amongst all general purpose credit cards (Visa, MasterCard, Discover and American Express). To further clarify, a merchant cannot have surcharge fees on Visa and MasterCard but no fee for American Express or Discover transactions – the surcharge fee must be the same for each Brand accepted by the Merchant. Additionally, PayPal currently does not allow surcharges. If the merchant accepts the PayPal Brand, they cannot implement surcharges on any of the other card Brands.
- Surcharge rules only apply to credit. Merchants are NOT allowed to surcharge on Debit (Signature or PIN) or Pre-paid cards.
- Display notification to its cardholders at the Point-Of-Sale (POS) or Point of Interaction (POI) (a.k.a. POS signage). POS signage must be displayed at the register/checkout for store fronts, and via the payment acceptance web page for electronic commerce merchants. See Sample Surcharge Disclosure.
If merchant chooses to surcharge, they must clearly disclose to their customers at the point of store entry or at the point of interaction (sale) and the dollar amount of the surcharge on the transaction receipt. The surcharge amount must be electronically printed on the cardholder’s receipt in order to allow the entire transaction (surcharge and amount of goods or services) amount to be submitted in the authorization and clearing records.
- Merchants must continue to comply with all applicable state laws that prohibit surcharging and state/federal laws regarding deceptive or misleading disclosures. Keep in mind that the states prohibiting surcharging for credit cards include California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.
- Must return original purchase - surcharge fee when a Refund (Return) is conducted.
- Government and education merchant categories have additional surcharge rules including Visa registration and service fee descriptor requirements.