Credit card fees and whether you’re able to pass them along to your client in an invoice (aka “surcharging”) is an incredibly confusing topic for any small business. And this is especially true for the weddings & events industry! The reality is – it is confusing because there isn’t just one clear rule around it. The states determine whether small businesses can bake in the credit card fee. And, over the past 5 years, those laws have changed, been challenged and are still in flux. To help navigate the ever-changing landscape, we did our homework. Below are the states where surcharging is absolutely not allowed, the states where you absolutely can pass it along and the ones with upcoming and open cases.
The States Where You Can Not Pass On the Credit Card Fees (as of May 2022)
Yep, you read that right. If you live and do business in one of the two states where you can’t get away with it at all are Connecticut and Massachusetts.
That said… there is a massive gray area around surcharging in the following 10 states.
Prior to 2017, these states limited or prohibited surcharging.
However, a Supreme Court ruling stated these bans can be challenged in courts for impeding merchants’ free speech. As a result, the ban was challenged and lifted in these states after 2017.
Further, there have been rulings and opinions in the remaining states that have left the surcharge ban up for interpretation (and likely to be shot down if challenged or have already been shot down in court):
In short: It is safe to assume that the majority of states (except for Connecticut and Massachusetts) do allow businesses to pass on credit card fees to their customers.
Our advice? Should you choose to pass your fees onto your couples, be honest and transparent on when they will be charged these fees, how much they will be charged, and why they are charged these fees. If you happen to live in one of those 10 states, we also suggest consulting a legal advisor and accountant to make sure you comply with current applicable state and local laws regarding surcharging, especially if you sit in one of those “up for interpretation” states.
Shameless plug time… With Maroo, we make it easy to pass along your fees to your customers in a compliant manner. Don’t have an account yet? Sign up for FREE as a business here: https://pay.maroo.us/v/signup
What is surcharging? According to Visa (also, happens to be the leading card network), a payment card surcharge, also known as a “checkout fee,” is an additional fee that a merchant adds to a consumer's bill when that person uses a card for payment.
Can surcharging happen with cards outside of credit cards? Nope! Due to restrictions implemented in 2010 by the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act, merchants cannot impose debit card or prepaid card surcharges. Surcharging around bank transfers, such as ACH are generally off the table as well.
(History Nugget: it was not until 2013 after a successful lawsuit from a group of U.S. merchants, when merchants were allowed to add a surcharge to credit card transactions to begin with).
Is offering a cash discount the same as surcharging? Surcharging and cash discounting are not the same; cash discounting typically refers to a discount that is offered to customers that are paying via cash or debit card. It is technically not a surcharge and is a common loophole to surcharging rules.
What’s the difference between a convenience fee and a surcharge? They are considered the same for many card networks. However, in the case of Visa, a “surcharge” refers to an added fee on credit cards and a convenience fee refers to adding extra fees to other payment methods.
Have more questions? Reach out to the team at [email protected]