The 4% Credit Card Surcharge – You are ALREADY Paying it

You’ve probably heard about this on the news lately, about how a new law just went into affect that allows merchants to pass on a 4% surcharge to cover credit card fees.  While merchants and customers both have mixed feelings about this, I’ll let you in on something that might affect your opinion: you’ve already been paying it all along.

I’ve run a few businesses over the years, all of which accepted credit cards, and all of which had a transaction cost associated with them (usually around 2% for Mastercard and Visa, and around 3% for American Express).  The contracts between my company and Visa/Mastercard/Amex were pretty clear – I couldn’t charge my credit card-paying customers a higher price than my cash customers.

As with any contract, you’re forced to make a decision: you accept the terms of the agreement, or you reject them and choose not to enter into the agreement.  I decided, as a business owner, that the terms of the agreement were acceptable.  It was my choice to make, not the government’s, and as a result of my decision I always made sure that my prices were structured in such a way that the fees associated with accepting a credit card were absorbed.

Every merchant who accepts credit cards operates this way. If you made a purchase from a business that accepted credit cards, you were paying their transaction fees – in the form of a slightly higher price of the product – whether you were paying with a credit card or not.  So at a glance, while the thought of finally being able to pass those extra fees along may seem attractive to business owners, we need to be honest and remind ourselves that we’re already doing it.

What the government has done here is essentially given merchants a permission slip to double-charge for their fees.  Since the cost of the fee is already built-in to the product price, if a merchant tacks on a 4% surcharge, they are charging you twice.

Think about it.  If you’re buying a product for $100, the merchant has already accounted for the fact that it could potentially cost them $2-3 more than a cash customer, therefore they’ve already worked that $2-3 into the price of the product because they weren’t allowed to charge the fee separately.  Now, they can jack the price up to $104 for credit card customers, citing fees as the reason.

It’s theft, and it’s wrong.  And I want to “out” every merchant who engages in this practice.  If you are a merchant who has decided to tack on an extra 4% to credit card customers, and you have not dropped your product prices to compensate for the fact that your credit card fees were already built-in, then you are double-charging your customers and they deserve to know about it.

And, just to throw it out there, who gave the government the authority to make this decision in the first place?  The provisions of merchant agreements are between the merchant and the provider.  Why are we allowing the government to come in and dictate what mutually-agreed terms are permitted?  It’s not their place.  Stay out of my wallet, and stay out of my contracts.

I encourage everyone to share this article with everyone you know, and to not only let your elected representatives know that you oppose this law, but to also stop doing business with any merchants who engage in the practice and let them know why.  We’re on to them – we know they’re double-charging for their fees, and we aren’t going to be taken advantage of whether the government allows it or not.

2 replies
  1. trey
    trey says:

    I own a small business that takes cards. My credit card fees yearly are over $50,000. Banks charge me a percentage of each sale and a flat fee, so on small sales a make no profit. The total fees are my biggest expense and far exceed the profit of my whole business. So I ask you what entitles the banks to get a percentage of my business? Their customer is using their card and they are charging 18% interest and I still have to pay part of the sale to the bank? How is that fair to small businesses?
    I assure you small business are being robbed by these banks and they will pass this fee back to the customer if allowed.

  2. Glen
    Glen says:

    The flip-side (while it won’t happen) is to do what gas stations have done for years, which is offering a cash discount price. Perhaps, and unlikely, businesses would lower their prices and only add on when a CC is used. More likely most businesses won’t do this, especially those that have credit cards they issue themselves, such as CostCo, Amazon, JCP, Target, etc. It may be a competitive move for those to say that they will not charge (or refund to get around the rules) if you use their specific card.


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