Can stores charge a fee for using a credit or debit card?

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Q. I recently went to pick up some food my wife ordered from a take-out restaurant. I paid cash, but saw the restaurant had a sign that a 4% surcharge would be added if paying by a credit or debit card. I thought that was illegal. Is it?
— Shopper

A. It’s not uncommon to see posted signs about surcharges or minimums if you want to pay by credit card.

It is indeed legal.

Business owners must pay credit card processing fees, said Lisa McKnight, a certified financial planner with Peapack Private Wealth Management in New Providence.

The fees can vary depending on the type of credit card used and the payment processing system used, she said.

“Credit card processing fees have become increasingly expensive, especially for small businesses who may have tight budgets and not bring in as much revenue as their larger competitors,” she said. “These fees can add up for a business, especially as the U.S. moves more and more to a cashless society.”

A 2013 class action lawsuit against Visa and Mastercard resulted in a settlement that allows businesses to pass some of the fees on to customers in the form of a credit card surcharge, McKnight said.

“So that there are no surprises, the businesses that choose to add surcharges are required to follow protocols to ensure full transparency,” she said.

For example, under Visa and Mastercard, businesses are required to register the surcharge with the payment network. Then, they must display a notice of the surcharge at the point of sale, both in-store and online. The consumer’s receipt must also indicate a surcharge was added to the bill, McKnight said.

“Additionally, it is perfectly legal for the business to offer a cash discount to a customer if they choose to pay with physical cash as opposed to a credit card,” she said. “The obvious reason is cash is much easier to process over credit cards and there is no middleman to pay.”

The surcharges may not be added for debit or pre-paid cards.

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This story was originally published on Oct. 21, 2021.

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