Visa and MasterCard have announced that as a result of a November 2012 federal district court settlement ruling, they will be able to provide merchants in the US and US territories the ability to add a
surcharge to cover the merchants’ cost of acceptance for certain credit card transactions, beginning January 27, 2013. Debit and prepaid cards are not eligible for surcharging.
The ability to add a surcharge at the Point Of Sale (POS) will require system updates by acquirers and, depending on a merchant’s POS system, possibly by merchants themselves.
The Visa and MasterCard websites provide rules and requirements for implementing surcharges. Although we’ve highlighted a few of the key elements below, we strongly encourage you to visit their websites if you are considering implementing surcharges.
If after reading these surcharge rule highlights below you still need more information, contact your WorldPay Executive Client Manager. We’ll be happy to help.
Steps You Must Take If You Plan To Surcharge
At least 30 days before implementing a surcharge, you must notify in writing:
- WorldPay – Please notify WorldPay first worldpay.us/surcharging (Online form best viewed in Internet Explorer 8 or above)
- Visa – Via visa.com/merchantsurcharging
- MasterCard – Via mastercardmerchant.com
Tell your customers about your surcharge practices at your Point Of Entry and Point Of Sale. Your disclosures must include:
- the amount you surcharge
- a statement that you, the merchant, are imposing the surcharge (not the payment network)
- a statement that the surcharge is not greater than card cost of acceptance
- the surcharge dollar amount on every receipt
Should You Surcharge?
Adding surcharges may affect the way your customers feel about doing business with you and could send them to competitors who choose not to surcharge. Cost-conscious customers consider all their options before making purchases. This extra customer fee—which appears on every receipt—will be highly visible and may hurt your business. Find out if your competitors surcharge. You may be able to gain an advantage with customers by skipping surcharges.
How Much Can You Surcharge?
Visa and MasterCard require that if you apply a surcharge on one card brand (Visa, MasterCard, Discover or American Express), you must surcharge all of the card brands you accept that allow surcharging and follow each payment network’s rules/regulations. Depending on a network’s surcharge rules, the surcharge amount can be a flat dollar amount or the card’s cost of acceptance, but it can’t be more than 4% of the total transaction amount. Additionally, merchants can’t surcharge if the states they do business in do not allow surcharging and/or the payment network does not allow surcharging.
Can You Set A Flat Surcharge Dollar Amount Rather Than A Percent Of The Total Transaction?
Yes, you may set a surcharge for a specific dollar amount provided it does not exceed the cost of acceptance for any of the payment networks you use and follows each payment network’s rules/regulations.
Can You Choose Which Cards To Surcharge?
Yes. You can either apply a surcharge at the brand level on all Visa and MasterCard credit transactions (and competitor cards too) or you can surcharge at the product level by selecting a specific card type to surcharge, such as MasterCard World Elite Card and any other type of competitor card accepted in the elite category. Visit the Visa and MasterCard websites for additional guidance around calculating productlevel surcharges. You may choose to surcharge at either the brand level or the product level, but not both.
Acceptable brand level surcharges add the same surcharge to all of a card brand’s transactions:
- regardless of the card’s issuer
- the surcharge is no greater than the card brand’s surcharge cap
- the surcharge is applied with the same conditions as any competing card brands you accept
Exceptions exist for merchants who enter into individual surcharge agreements with competitive credit card brands, so be sure to check with your payment networks for rules surrounding surcharging
Is Surcharging Allowed Only At The Physical Point Of Sale Or Is It Allowed for eCommerce?
Surcharges are allowed for both physical Point Of Sale and via eCommerce. During the written notification process mentioned earlier, you must identify the channel through which you wish to surcharge.
Must You Apply Surcharges At All Your Locations If You Decide To Surcharge?
No. You do not have to apply surcharges at all your locations.
How Do Surcharges Apply To Refund Transactions?
You may use your discretion whether to refund any portion of a surcharge. However, you are not allowed to apply an additional surcharge for the refund transaction.
Who Is Not Eligible To Surcharge?
Ten states currently have surcharge restrictions. Please consult legal counsel to follow all applicable state or federal laws. States with restrictions include: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.
Where Can You Learn More About The Settlement Ruling?
You can learn more about the settlement ruling at www.paymentcardsettlement.com