EXEControl Global Solutions recently was asked about the legality of companies passing on credit card transaction fees to customers. Recent news has reported that stores can charge up to 4% surcharge for credit card payments in some states.
As most people know, credit card companies charge a fee to the stores that accept their card for payment. This is necessary because there is a level of exposure that every credit card company assumes when brokering the transaction. Historically, credit card companies have prohibited the stores to charge a fee to the end user when using their card. This agreement was a part of the contract the store would sign with the credit card companies.
Now, several states have made it legal for stores to charge a fee to the consumer for their purchases. New York State, where EXEControl Global Solutions’ headquarters are, has not passed such a law and in New York State it still remains that the stores may not pass on a charge to the consumer.
EXEControl Global Solutions has brokered with several processing companies to meet the credit card demands of our customers, so EXEControl Global Solutions decided to ask one of them regarding the new changes in state laws.
Here is what we found from Heartland Payment Systems’ Relationship Manager, Ronald Von Fricken:
Is this concept of charging extra to use a credit card new? I have to pay more when using my card at many gas stations. – There has always been a provision to offer ‘cash discounts’ as in the case with many retail gas locations. In the past, the cost of tendering a transaction has always been built into the price. A retailer could then offer a discount for less risky, or costly, payment methods.
Does this affect all cards? – The allowing of an additional charge to the consumer is only for credit cards. It is not legal for situations where the consumer uses their debit/check cards.
Are the stores just trying to cover their costs? – Depending on the amount being charged to the consumer, this added fee to the consumer could very well be higher than the actual cost being charged to the store. If you are a Heartland customer, hopefully, you are not paying 4% and I would venture to say that is the case for the majority of my clients. Time will tell what retailers will actually do with this ‘new opportunity’, however, many of the national retailers have said that they will NOT be imposing any additional charge to their customers.
Do you have advice to retailers considering charging a credit card service fee? – Businesses need to consider their customer perception of any additional charge. IF ABC Corporation charges an extra 4% and corporation DEF does not, whom will the customer choose? We might see some industries like government, utilities and education take advantage of this new option but many retailers probably will not. It is just too early to tell.
To EXEControl ERP customers: EXEControl customers may take any approach desired toward tendering fees since EXEControl supports tender service fees, tender discounts and the management for the cost of tendering. EXEControl Global Solutions is committed to providing the greatest flexibility possible to our customers so that each customer can conduct business in the way they personally feel is in the best interest for their business and their customers.