Credit card surcharges can be costly for business

Your Business Credit columnist Elaine Pofeldt
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

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Question Dear Your Business Credit,
I read your email on credit card fees and have a question that is similar on a business transaction. We are a distributor and have been told we have to pay a surcharge to use a credit card by a carrier in California. Is this acceptable? Thanks. – Maggie

Answer Dear Maggie,
Ouch! Those surcharges hurt – especially if you are running a small business on a tight budget. Unfortunately for the moment, it looks like your carrier can impose a surcharge. However, that could change.

“By passing Civil Code section 1748.1 California made it illegal for retailers to charge consumers a surcharge for using a credit card as an alternate form of payment,” Seth Hanson, a bankruptcy attorney who practices in Sacramento, California, said in an email. “However, in March 2015, a federal court enjoined the state from enforcing the surcharge statute because the court determined the statute was unconstitutional. As things currently stand, retailers can add a surcharge when a consumer uses a credit card as an alternate form of payment.”

As you mentioned, your transaction was with a carrier, not, say, a clothing shop or other type of business most of us associate with retail. However, Hanson says the carrier can still impose a surcharge.

“The statutory definition of ‘retailer’ includes ‘every person other than a card issuer who furnishes money, goods, services, or anything else of value upon presentation of a credit card by a cardholder’ except for government entities,” Hanson wrote in an email. “Under that definition, the carrier in question will qualify as a retailer and will fall under the statute. Remember though, that enforcement of the statute has been enjoined, so the statute does not currently apply to anyone. The carrier can charge the surcharge."

Merchants do have to abide by California’s laws against unfair and deceptive business practices, added Hanson. If they plan to impose a surcharge, they need to make that disclosure in advance.

It appears you are frustrated by the surcharge. In business, many things are negotiable. If you are a good customer for the carrier, you might be able to persuade the company to drop the surcharge. Or if you opt to pay by check or a debit from your checking account, the carrier would not have to pay a credit card fee on the transaction and would have no reason to impose a surcharge.

When I pay very small businesses, I have increasingly been paying by check, not credit card, to help them avoid credit card processing fees. Yes, checks can be cumbersome and dated, and many people don’t even use them anymore, but otherwise, these businesses might have to raise their prices.

Given that the law governing surcharges could change in California, I’d suggest setting up a search engine alert to stay abreast of news on this topic. If it becomes illegal for merchants to impose a surcharge, contact your carrier immediately to get the charges stopped. Good luck!

See related: Can my business add a surcharge for card-paying customers?, Should we charge our customers to use credit cards?  

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Updated: 02-22-2019