What are my rights regarding credit card surcharges?

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 200kfreelancer.com, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for CreditCards.com.

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Question Dear Your Business Credit,
Today, I went to a deli for lunch and the bill came out to $11. The counter person said he had to charge me an extra dollar for using a Visa card because they have a $12 minimum on cards. I told him that was against his contract with Visa and refused to pay. Are businesses allowed to do that? – Gerard

Answer Dear Gerard,
This is a complicated situation. The deli may have been allowed to impose a surcharge on credit card purchases – but it is not entitled to charge customers more for not meeting a minimum purchase requirement. You were right to refuse to pay the surcharge, but perhaps not for the reason you think.

Depending on their state, many businesses are allowed to impose a surcharge on credit card purchases made on Visa and MasterCard, under a court settlement that took effect in January 2013. At present, merchants can pass along a charge equal to what they pay to accept the card, up to 4 percent. For a more detailed discussion, see our story on merchants adding surcharges. But even if you are in a state that allows surcharges, the 9 percent surcharge the deli imposed on your lunch would exceed the 4 percent that is allowed.

However, some states have anti-surcharge laws. They are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Texas and Utah. If you are in one of those states, you can look up the laws on the National Conference of State Legislatures’ site to see if the deli violated them.

Where the deli is wrong is in imposing a minimum credit card purchase of $12. Under the Dodd-Frank Wall Street Reform and Consumer Protection Act, the minimum for credit card purchases cannot be greater than $10. The law also gives the Federal Reserve the right to increase the minimum.

Because the deli set a limit above $10, you could call the phone number on your Visa card to report the business for setting too high a minimum purchase limit. Imposing the higher limit would violate the merchant’s agreement with Visa and could potentially jeopardize the deli’s ability to accept the card.

However, if the deli makes a great pastrami on rye, and you want the owner to be able to continue accepting Visa cards, you might want to give the owner another chance and instead show up next time with Visa’s guidelines for merchants.

The situation would have been different if you wanted to pay with a debit card, by the way. “There is no law regarding debit card transaction minimums, and whether or not a merchant can have a debit card transaction minimum depends on the contractual agreement between the card network (Visa, MasterCard, etc.) and the merchant,” said Charlton M. Messer, founder of Messer Law Firm PLLC in Dallas, in an email. “For example, Visa does not allow any minimum transaction amount for debit card purchases.” Nonetheless, surcharges are not allowed for debit card purchases.

As you can see, the laws and rules governing credit card transactions are very complicated. For that reason, I highly recommend that every small business owner look up the merchant guidelines for every card they accept at least several times a year, to make sure they are not violating any rules. It’s all too easy to make mistakes – and alienate customers like you.

See related: Can my business add a surcharge for card-paying customers?, Merchants can usually add credit card fees

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Updated: 08-15-2018