Credit card surcharge laws in limbo in California
By Elaine Pofeldt | Published: December 14, 2015
Your Business Credit
Dear Your Business Credit,
I read your article "Can a doctor's office charge a credit card surcharge?" I'm in a finance department of a California nonprofit clinic and we have the same question. I noticed the reference you cited is in 2013. I wonder whether it is still true that we can't charge credit card fees to patients? -- Athena
Right now this is a gray area for merchants, including physicians. As I mentioned in a recent column ("When buying gasoline for business, watch discounts, surcharges"), California still has a law that blocks all merchants from adding a surcharge when customers pay by credit card. However, that law is currently unenforceable.
According to the Office of the Attorney General in California, California Civil Code section 1748.1 (also called the Song-Beverly Credit Card Act of 197s these surcharges. But a federal court found the law unconstitutional in March 2015 and barred the Attorney General's office from enforcing it. The Attorney General's office has appealed that decision, but until there is a ruling, its hands are tied.
Since this situation is in flux right now, I would suggest holding off on adding a surcharge. I know medical practices are being squeezed from all sides, and it can be a hardship to swallow credit card processing fees. However, my sense is that adding a surcharge and then taking it away if the law becomes enforceable again in the near future will just create confusion for your staff and patients.
What you can do is offer a discount to people who pay cash. As I discussed in a different column, ("Can my business add surcharge for card-paying customers?"), California Civil Code 1748.1 does not prevent merchants from giving a discount to people who pay cash. You do, however, need to post signs informing your patients of the discount. California law says if a merchant offers a cash discount, "but does not fully disclose this to customers prior to their committing themselves to the goods or services, or if the merchant does not clearly explain its policies regarding debit and credit cards, the merchant may be violating California law," according to the Attorney General's website.
There are some downsides to offering a cash discount. One is that it could result in your office staff handling a lot of cash, which can increase the risk of robbery and lead to record-keeping problems. If you're considering this option, do some calculations to figure out how much cash that would be on a typical day. In a multi-physician office, it might really add up, which would mean you'd need a way to securely transport the money to the bank.
That may be more hassle than it's worth. If your practice needs to find ways to offset the rising costs of staying afloat, I'd strongly suggest asking owners of other practices in your area if they can recommend a consultant to help you streamline costs and improve revenue. Hiring a good consultant will more than pay for itself.
Meet CreditCards.com's reader Q&A expertsDoes a personal finance problem have you worried? Monday through Saturday, CreditCards.com's Q&A experts answer questions from readers. Ask a question, or click on any expert to see their previous answers.
- Options to collect from customers who can't pay their balance in full – When dealing with customers in financial distress, suggesting a payment plan might be the best way to ensure you get full payment ...
- Q&A: Ex-partner was authorized user; is he liable for card debt? – Your ex-business partner could be equally liable for the company's credit card debt even if he was just an authorized user on the card. Here's how to find out ...
- Q&A: Can I charge cards with a mobile app for my side hustle? – If you're operating a side hustle and wondering about your rights when it comes to charging cards on file and paying taxes, make sure you do your homework before you find yourself in trouble ...