Credit Card Checkout Fees Cannot be Charged to Clients in 10 States
For the last several years, it has been illegal to pass on the credit card processing fee to your customer. (This is also called a “checkout fee”. It’s when charge your customer for the 1.5-3% of credit card processing.) Earlier this year, as the result of a lawsuit between retailers and the payments industry, this law was reversed in 40 states. NOTE: there are still 10 states where this is not allowed.
You CANNOT charge the credit card fee (aka “checkout fee” or “swipe fee”) to your clients in these 10 states:
- California
- Colorado
- Connecticut
- Florida
- Kansas
- Maine
- Massachusetts
- New York
- Oklahoma
- Texas
Note: it’s also against Paypal’s policy to add a fee to cover their processing. If found out, your account can risk being shut down.
Charging Checkout Fees
If you do live in a state where this OK and you want to charge this, you are required to inform your clients in one of the following ways:
- at the store entrance
- at the point of sale online (at the first website page where you ask for payment information), AND
- on the customer’s receipt (as a line item that says “surcharge”)
But – keep in mind – even if you are ‘allowed’ to do this now, is this something you want to be doing to your clients? Nickle-n-diming them? Or is it better to raise your pricing overall to absorb such costs of doing business? On the flip side, the U.S. suffers from credit card abuse. Does this incentivize people to spend money they have? (Here’s a really great article from Wall Street Journal about how a business owner sees this as a way to encourage cash use. It’s an interesting point of view.)
“Steering” Clients towards Cash/Check Payments
If you do business in one of the states where you cannot pass along the checkout fee, you can ‘steer’ clients towards using cash by offering a discount if paying with a check or cash. This would also be applicable with Paypal (and other online merchant processors).
Learn more at knowyourcard.org and consumer-action.org . (Your credit card processing companies will also have information on this.)
What are your thoughts? Will/Do you pass along the checkout fee to your client?
Although the fee is legal in my state; I stopped accepting credit cards all together. One because I felt that the processing charges were too expensive and two because when I reviewed my client history – only one client paid by credit card. Neither I nor my clients should be paying banks to spend money.
I like this Nic! When I did wedding invites, I didn’t accept credit cards. It was fine by my customers as long as I spaced out payments.
This is good info! I always knew that you couldn’t charge them an extra fee for using a credit card, but had no idea that 40 states have changed this. My question is, are those 40 states allowing the PayPal charge too? Or is it not allowed regardless of your location with PayPal?
I’m not totally certain on the Paypal. I understand that it’s their company policy. But, I wasn’t able to find anything in my searching that would tell me definitively one way or another.