It’s legal in 46 states, including Indiana and Illinois, for businesses to apply surcharges to credit card transactions. However, it’s a violation of card brand rules and some state laws to apply surcharges to debit or prepaid card transactions.
Another food truck vendor told me that she uses Square, which charges a fee for customers using credit cards.
“As of now we do not pass that charge on to customers. But this does hurt small businesses,” she said.
I typically use a Discover card, allowing customers to get 1% cash back on all standard purchases. I’m not a math major, but I can see the savings between 1% and 3.5% through dozens or hundreds of sales.
Because of this, I’m finding myself paying more merchants with cash to save a few bucks here and there. It adds up on all fronts.
A 3% credit card surcharge applied across all U.S. credit card transactions has the theoretical potential to generate roughly $66 billion annually, according to a Nilson Report this year.
Those surcharge fees don’t equate to a net profit for a business. They serve as a pass-through mechanism to offset the exact processing fees, which vary from 1.5% to 4%. Most large corporate retailers absorb those costs as a customer service perk. Smaller businesses and mom-and-pop stores can’t afford it.
More restaurants and other merchants around Northwest Indiana are adding something to the bill that can be easy to miss for customers: a 3% or 4% credit card surcharge. Not for sales tax. Not for a tip. It’s the fee to offset processing costs for credit card companies.
As a former restaurant owner, I get it. I have no problem with it. That’s a business decision. But it should also be a customer decision. We can’t make an informed choice about paying a surcharge that we didn’t know existed.
It’s legal in 46 states, including Indiana and Illinois, for businesses to apply surcharges to credit card transactions. However, it’s a violation of card brand rules and some state laws to apply surcharges to debit or prepaid card transactions.
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The key is to ask before you pay, when applicable. Credit card companies are making enough money as it is. We don’t need to nickel and dime our own bills to inflate their billion-dollar profit margins.