Surcharging for card payments has been in the news again as Colorado repealed its state’s ban on surcharging. In Colorado, merchants can now surcharge up to 2% of the purchase or the actual cost that the merchant will pay to process that transaction. Merchants should be able to charge whatever they want for the goods and services they sell, but it seems odd to single out the cost of payments for special treatment. Why stop with payment surcharges? Why not charge extra for the current higher costs of labor or for the annual percentage increase in healthcare that they provide their workers or overall inflation rates?
Some merchants, such as Hilton have begun to itemize card processing fees on their guests’ bills and charge them extra. This does not make guests happy as The Points Guy posted. If Hilton is going to charge more for using a credit card, I am going to want to use a different payment type. Does that mean that I can now hold a room by telling Hilton that I will pay with a check?
I understand that many merchants believe that they should pay less for payment processing, and they can certainly raise their prices to reflect an increase in their cost of doing business. But why would a merchant make something as arcane as the cost of payment processing a customer issue and risk irritation and potential loss of a sale?
Here’s what Digital Transactions had to say about the recent ban on surcharges in Colorado:
The bill aligns with U.S. Supreme Court precedent and legal decisions in other states ruling that surcharge bans unconstitutionally restrict merchants’ First Amendment rights.
“Colorado legislators looked at surcharging laws throughout the country and decided they did not want a Wild West environment if the state’s surcharge prohibition was dropped,” says Michael Tomko, chief operating officer for CardX LLC, which lobbied and testified in support of the bill. “The card brands created a robust engine for surcharging to ensure that there is appropriate disclosure for surcharging, such as itemizing the surcharge on the receipt, and Colorado decided it wanted to take those best practices, and the best practices from other surcharge laws around the country and create a law that harmonizes with the rules for surcharging nationally.”
The signing of the bill in to law, which Colorado state’s legislature passed in June, closely follows defeat of a surcharging ban in Kansas earlier this year. Chicago-based CardX, which is a surcharging-services provider, filed suit against that ban.
Colorado’s passage of the law leaves just two states—Massachusetts and Connecticut—with surcharging bans. Lawmakers in both states are surveying the surcharging landscape nationally, Tomko says.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group