The Surprising Nuances of Surcharging: Part II

Credit Card Payment Buy, And Sell Products & Service

With 40 million credit card types and an evolving set of state and federal surcharge regulations, applying a one-size-fits-all approach to national surcharging isn’t feasible. In our previous blog, we highlighted key considerations for merchants interested in building an effective, fully compliant surcharge program. Now, we’re taking a closer look at surcharge regulations and sharing success stories from merchants using our surcharge solution.

Navigating National, Regional, and Card Network Surcharging Regulations

Prior to 2017, nearly all states prohibited surcharging—a simpler time for merchants. Since credit card surcharges became legal in the United States, federal courts have overturned all but a few states’ and territories’ surcharge prohibitions.  Since then, nearly 23% of US small and medium businesses surcharge today – double the number just 3 years ago.

In response to rising forms of fee recovery, state, federal, and card network enforcement is rising.  Individual states are more aggressively regulating surcharging.  Several other states have current laws which prohibit surcharges.  Card network surcharge rules have grown more complex since 2017.  To add to the complexity, these regulations oftentimes conflict.  Nonetheless, in regions where surcharges are permitted, merchants must follow three primary guidelines: only surcharge credit cards, never profit from a surcharge, and fully disclose the surcharge to the customer before a transaction is made.

Let’s look at a few state-specific examples.

  • Colorado, New Jersey and New York have implemented specific laws for surcharging.
    • Colorado allows merchants to surcharge either up to a 2% maximum cap OR up to the cost of accepting the credit card transaction.
    • New Jersey prohibits any surcharge that is greater than the cost of accepting the credit card transaction.
    • New York’s law also limits surcharges to the cost of accepting a credit card, but also requires that the price with the surcharge doesn’t exceed the “posted price” the customer sees.
  • Connecticut and Maine prohibit surcharging all together.
  • Several other states maintain anti-surcharge statutes in their rulebooks.

The variances in regulations across state lines prove a single nationwide approach won’t maximize savings or is non-compliant. Increasingly, merchants of all sizes seek solutions that mirror what they use for sales tax: automated compliance at the time of transaction.  Most implement compliant technology built to contractually prevent and indemnify them against state, federal, AND card network enforcement actions to protect their business.

Success Stories in Surcharging

Despite the complexity of regulations and the nuances of compliance, the immense cost savings provided by surcharging technology makes the case for its adoption. With a proven track record of achieving significant cost savings and revenue recovery for customers spanning a diverse set of industries, our out-of-the-box and customized surcharging solutions—backed by our compliance and indemnification guarantee—can deliver significant ROI to businesses.

For one SAP-powered enterprise looking to expand operating margins, surcharging was a prime opportunity. Traditional surcharging solutions required a disruptive switch to a new processor, and retaining their existing payments platform was critical. Of all the surcharge solutions available, only InterPayments offered a solution that checked all the boxes. As a result of a one-time integration with InterPayments, the company expects to save an astounding $44 million per year on operational costs.

For another merchant, InterPayments offered a solution to reduce their growing credit card fees without impacting the customer experience, conversion, or retention rates. With InterPayments fully deployed across the merchants’ business, they anticipate savings up to $700,000 on surcharged transactions.

The collective cost savings of our customers across various industries demonstrate the value of InterPayments’ dynamic surcharging solution:

With the right surcharging platform, merchants can recover up to 100% of credit card processing fees they choose to surcharge. At the click of a button, InterPayments offers you total flexibility over whether, when, where, and how you surcharge to ensure you’re always in total control of your business outcomes.