Can A Business Charge For Using A Credit Card? | Bankrate (2024)

FAQs

Can A Business Charge For Using A Credit Card? | Bankrate? ›

Credit card surcharges can't exceed the cost of accepting the card or four percent, whichever is the lower amount, even if it costs the business more than that amount to process your credit card payment.

The answer is: yes, if your business operates in states where it is legal to do so. As of the time of publishing this, the practice of imposing additional fees on credit card transactions (i.e., credit card surcharges) is prohibited in only three U.S. locations: Connecticut, Massachusetts, and Puerto Rico.

Credit card surcharges are optional fees that merchants charge customers who use a credit card to pay at checkout. Surcharges are legal unless restricted by state law and are limited to 4% of the total transaction.

When a store says you must spend at least $10 to use your credit card, that's not an arbitrary amount. According to a 2010 ruling under the Dodd-Frank law , a business is allowed to set a credit card minimum of up to $10, as long as that same standard applies to all the credit cards accepted by that merchant.

In recurring billing situations such as subscription services or regular purchases, for example, the business can automatically charge the stored credit card without requiring the customer to reenter their information each time.

To date, only two states and one jurisdiction still outlaw the use of credit card surcharges. They are a result of non-qualified transactions of different communications methods.: Connecticut, Massachusetts, and Puerto Rico.

Key Takeaways. Credit card fees are not deductible for individuals and are deductible for businesses. Businesses can deduct all credit card fees as well as finance charges. Businesses are eligible to deduct credit or debit card processing fees associated with paying taxes, but individuals are not.

The typical fee for credit card processing ranges from 1.5% to 3.5% of the total transaction. Who pays credit card processing fees? Merchants typically pay credit card processing fees, though these fees are an operating cost and thus can affect how merchants price their goods and services.

Why are businesses charging to use credit cards? ›

A credit card surcharge (or cc surcharge) is a fee enforced by the merchant to compensate for some of the cost of payment processing. This fee can only apply to credit cards—and never debit, even when a debit card is run like a credit. As for calculating the fee, surcharges are predominantly percentage-based.

It's illegal for a merchant to impose a minimum purchase amount for debit card purchases. It also states that if the merchant chooses to impose a $10 minimum purchase requirement for credit card purchases, then it must do it for all credit card companies.

A surcharge is not a convenience fee. A convenience fee is levied by a merchant for offering customers the privilege of paying with an alternative non-standard payment method. Merchants can process convenience fees in all 50 states. A surcharge is levied by a merchant for customer purchases made with a credit card.

But passing on credit card fees to customers is legal in the majority of the U.S. Whether or not a merchant can charge them boils down to local laws and the parameters provided by payment processing networks. Being familiar with the restrictions in your area is important to ensure you aren't overcharged.

Because debit card surcharging is illegal for the most part, you may be wondering, “How can I offset costs in another way?” There are a couple of tried and tested ways for merchants to offset the cost of transaction processing fees outside of implementing surcharging.

Yes, of course unauthorized transactions are illegal. In many cases, however, the card holder unknowingly authorized them. It's in the fine print many of us gloss over. That's where you'll find details about subscriptions and fees.

Does the company have the right to make me use my own credit card for business travel? A Yes, it does. The law requires only that employers reimburse employees for any amounts they expend in performing their duties. It does not require employers to provide company credit cards or to advance expenses.

The bulk of your business credit card charges boil down to the merchant service charge (MSC), covering the cost of processing payments. This is the transaction fee added to every sale. It's usually charged as a percentage and the rate will depend on the type of card used.

Credit card surcharging

This practice is legal in all but four states — Connecticut, Maine, Massachusetts and Oklahoma — additionally, Colorado caps the surcharge fee at 2%. It is also important to note that surcharging is not allowed for debit cards, even when they are run as a credit transaction.