Credit Card Surcharge Fees in New York: A Guide for Businesses

ALBANY, NY | With credit card surcharge fees ranging between 1.5% and 3.5%,¹https://www.forbes.com/advisor/business/credit-card-processing-fees/#:~:text=The%20average%20credit%20card%20processing,fee%20ranges%20between%201.5%25%20and%203.5%25. including a surcharge fee for consumers or clients may be tempting. However, in New York State, with laws regulating the permissibility of surcharge fees on credit cards, you must ensure you are adding the fees properly and lawfully as failure to comply can result in a fine of up to $500 for each violation.²N.Y. Gen. Bus. Law § 518(2) (McKinney).It is important to note that this law does NOT apply to debit card transactions.³https://www.governor.ny.gov/news/governor-hochul-announces-new-law-clarify-disclosure-credit-card-surcharges-goes-effect-sunday.

In early 2024 an update to existing law came into effect permitting sellers to impose an additional fee on credit card transactions as opposed to cash purchases. However, while permitted to do so, the total price of the transaction, inclusive of the surcharge must be conspicuously posted. ⁴N.Y. Gen. Bus. Law § 518(1) (McKinney).Further, the charged amount may not exceed the amount which the processing company actually takes from the transaction.⁵Id.Stated differently, if one credit card processer charges one price for card A but a lesser price for card B, users paying with card B may not be charged the higher card A rate. Further, the final sales charge, inclusive of the surcharge, may not exceed the posted price.⁶Id.

Simply posting a sign that says credit card surcharge is, for example, 3%, or a sign indicating that there is a convenience or service fee, does not suffice.⁷https://www.governor.ny.gov/sites/default/files/2024-02/Credit-Card-Surcharge-Law-Notice.pdf

A business may, however, list both the cash and credit price (similar to how it is done by many gas stations), or list a higher price then offer a cash discount at the register.⁸Id.

Surcharging vs. Discounting: Rules and Best Practices

Credit card processing fees can significantly impact your bottom line, particularly on smaller transactions. To mitigate these costs, businesses can employ two strategies: surcharging and discounting. However, both methods come with their own set of rules, governed by card brand regulations and state law.

Surcharging: This involves passing the cost of processing credit card payments onto customers. Despite misconceptions, surcharging is legal in many states, including New York, provided specific conditions are met. Businesses intending to surcharge must:

• Notify Visa and Mastercard 30 days in advance of their start date.
• Only surcharge credit cards, not debit cards.
• Ensure the surcharge does not exceed the actual cost of processing the card and is capped at 4%.
• Clearly disclose the surcharge amount and provide the customer with a total that includes the surcharge.
• Display proper signage indicating the surcharge.

Discounting: Unlike surcharging, discounting involves offering a lower price to customers who pay by cash or other non-credit methods. This approach is generally more favorable to both credit card brands and consumers. Key rules for discounting include:

• Clearly displaying the discount from the full price of the services.
• Notifying customers of the discount at the time of payment through signage and other forms of communication.
• Applying discounts to both credit and debit card transactions.

By following these rules and maintaining transparency, businesses can recover credit card processing fees while keeping customers informed and compliant with the law.

Written by TLF Partner, Christine Taylor and Summer Associate, Eli Raul. Contact Us Today!

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