You may now surcharge on credit card transactions, sort of…

A result of the recent card association / merchant settlement is that merchants may now place a surcharge on their credit transactions. We’ve already been getting a lot of phone calls about this, so let’s go over a few of the basics. You should also review Visa’s official information on surcharging for the in-depth details.

If you live in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, or Texas forget about it. It is illegal in your state to add any surcharge on a credit transaction and state laws always trump operating regulations facilitated by private entities.

If you live in one of the other 40 states, you may be able to surcharge beginning January 27th, 2013.

In a nutshell, here’s what’s going to happen. Make sure you check with Visa’s and other association websites before adding a surcharge to ensure you are complying with all of the implemented rules and regulations.

• Notify Visa and your acquirer at least 30 days in advance of beginning to surcharge.
• Limit surcharging to credit cards only (no surcharging debit and prepaid cards) and limit the amount to your merchant discount rate for the applicable credit card surcharged.
• Disclose the surcharge as a merchant fee and clearly alert consumers to the practice at the point of sale – both in store and online – and on every receipt.

Remember, you cannot surcharge a debit card no matter how it is processed. You cannot surcharge if you accept American Express or Paypal. You cannot charge a prepaid card no matter how it is processed. You cannot under any circumstance charge more than you are paying to accept that specific card. There are specific rate limits listed on Visa’s website.

Although this may seem like a beneficial and obvious solution to some merchants, I strongly urge you to take a good look before implementing a surcharge. Shifting a cost like this is not going to fare well with many customers. I would personally not make a decision like this lightly. If you do decide that you want to surcharge, make sure you have a plan to test and back out if necessary. As proven in Australia, surcharging credit transactions has the potential to drastically alter payment preferences and will often upset a customer no matter how the surcharge is presented. In the world of social media, surcharging has the potential to generate a lot of bad publicity, very quickly, if you upset the wrong customer base.

Lastly, don’t be surprised if this change in regulation is retracted in the future. Consumers drive commerce in the US and they certainly will have their shot at overturning surcharging if they feel that it is unfair.