Impact of the reformed U.S. surcharging rules.

When Mastercard and Visa began in January 2013 to allow U.S. merchants to add a surcharge for card payments, we weren’t sure what to expect, but now we have some answers. First Annapolis reported that merchants have been slow to adopt surcharging thus far. Nevertheless, we know that, even before surcharging was allowed, some merchants still pursued it. The issue will not go away. To best serve our Commercial Card programs, we need to stay informed on this evolving story and be prepared. 

Potential Reasons for Lack of Surcharging

Which merchants will adopt surcharging at the risk of causing tumbling sales?

Which merchants will adopt surcharging at the risk of causing tumbling sales?

As First Annapolis consultant Paul Sammer and senior analyst Jeff Avery observe within their article, “The absence of surcharging is especially notable given that most of the merchants that had actively sought the ability to institute the practice have refrained from doing so.” They attribute the lack of surcharging to:

  • potential consumer [buyer] backlash and consequential lost sales

  • implementation challenges, as many point-of-sale (POS) systems do not have the functionality to support it

They note that certain processors, such as First Data, have decided thus far not to support surcharging capabilities. This stance had been predicted by Greg Evans, president, LIMA3 Systems, during my first quarter 2014 interview with him. Greg had also shared, “As far as I know, there is no mandated date requiring processors to update their systems and API to comply with the surcharge rules. In addition, the software, terminal and POS vendors will need to update their software to comply with the customer notification, receipt requirements, and ability to differentiate between a credit and debit card.” Read my complete interview with Greg.

United States Compared to Other Countries

The First Annapolis article points out that a key difference between countries abroad and the United States is that surcharges above acceptance cost have been possible overseas since inception, making it a possible source of revenue. In the U.S., restrictions have been put in place that limit surcharging only to cost recovery.

Your Organization’s Strategy

What will or does your organization do when encountering a merchant who wants to surcharge? First, there are proactive measures you can take, such as including a “no surcharge” term in your contracts. However, you should also prepare in advance for what to do if your efforts to combat a surcharge fail. Will you pay a different way, accept the surcharge or use a different supplier? Evaluate the costs of each option and weigh against the benefits of card usage. If possible, create an internal policy and related procedures for different surcharge situations. 

For more information, access the surcharging webpage.

About the Author

Blog post author Lynn Larson, CPCP, is the founder of Recharged Education. With more than 15 years of Commercial Card experience, her mission is to make industry education readily accessible to all. Learn more

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