Avoid Fines, Legal Issues, & Chargebacks — Here's How Virtue Payments Keeps Your Business Protected
In today's competitive market, businesses are continually seeking ways to manage costs without compromising customer satisfaction. One strategy gaining traction is credit card surcharging—passing processing fees to customers who choose to pay by card.
While surcharging can be a valuable tool for cost recovery, it's governed by a complex web of federal and state laws, as well as card brand regulations. Non-compliance can lead to hefty fines, legal challenges, chargebacks, and damage to your business reputation.
At Virtue Payments, we specialize in providing merchants with compliant surcharging solutions that align with current regulations and card brand rules. Let's explore why compliance is critical and how Virtue Payments can help you navigate this terrain with confidence.
Understanding Surcharging
Surcharging involves adding a fee to a customer's transaction when they choose to pay with a credit card, helping merchants offset the costs associated with credit card processing. However, this practice is heavily regulated:
-
Card Brand Rules: Visa and Mastercard require merchants to notify their acquirer at least 30 days before implementing surcharges. Visa caps the surcharge amount at 3% and clearly states it cannot be greater than the merchant's cost of acceptance. Surcharging must only apply to credit card, never debit or prepaid cards. You can view Visa's full list of requirements on their website here.
-
State Laws: Surcharging laws vary by state. Some—like New York, Colorado, and New Jersey—allow surcharging under strict rules, such as disclosure requirements and caps on the surcharge percentage. Others, like Massachusetts, Maine, Connecticut, and Oklahoma, still prohibit surcharging entirely.
-
Federal Regulations: While there’s no federal ban on credit card surcharging, federal law does make surcharging of debit cards illegal nationwide under the Durbin Amendment (15 U.S.C. § 1693o-2). This applies regardless of whether the customer signs or uses a PIN. Doing so—even unintentionally—can result in serious consequences.
The Risk of Non-Compliance
Most merchants don't realize how strict the credit card industry is when it comes to surcharging. If you're adding a surcharge fee to your transactions without following the rules, you could face:
-
Fines and Penalties:
Card networks like Visa may fine acquiring banks—who pass those penalties on to merchants—up to $25,000 or more for ongoing violations. -
Legal Action:
Violating state laws can trigger consumer lawsuits, regulatory action, or enforcement by attorneys general, especially in states where surcharging is restricted or banned. -
Reputational Damage:
Improper surcharging practices can frustrate customers, especially if fees are not clearly disclosed. Poor user experience can lead to negative reviews, brand distrust, and lost repeat business. -
Chargeback Risks:
Unexpected or improperly disclosed surcharges often result in chargebacks. Customers may dispute the full transaction if they feel misled about fees, leaving you with lost revenue and chargeback processing costs. -
Potentially loosing your ability to accept credit cards altogether:
Repeated or severe violations can result in your business being placed on the MATCH List, essentially blacklisting you from obtaining future merchant accounts.
In short: non-compliance can cost you far more than you save.
What True Compliance Looks Like:
Merchants must meet very specific requirements in order to stay compliant, including:
- Registration with appropriate parties: Register with your acquirer and the card brands before implementing.
- Display the surcharge properly: Clearly display signage at the point-of-entry, checkout screens, and receipts.
- Proper Surcharge % : The surcharge amount cannot be greater than caps set by the Card Brands, or exceed the cost of acceptance.
- Surcharge ONLY Eligible Cards: Ensure the surcharge is not applied to debit or prepaid cards transactions.
Even businesses with the best intentions can slip out of compliance—particularly when using outdated systems or third-party processors that fail to stay current with changing regulations.
How Virtue Payments Helps You Stay Compliant
Virtue Payments offers turnkey surcharging solutions that keeps your business fully compliant, automatically:
✔️ Registration Support: We manage your Card Brand registration process, ensuring you're set up correctly from day one.
✔️ Transparent Disclosures: Our technology presents clear, compliant messaging on receipts, checkout screens, and signage. (In-store & Online)
✔️ Establish Surcharge %: We calculate the correct surcharge amount based on Card Brand caps and your exact cost of credit card acceptance.
✔️ Debit Card Detection: Our system automatically detects debit and prepaid cards in real-time, ensuring no surcharges are ever applied to those transactions, protecting you from federal violations.
We also provide a complimentary compliance review of your current surcharging setup to help identify and eliminate any potential risks.
Take the Next Step with Virtue Payments
You don’t have to guess your way through surcharge compliance—or risk penalties doing it wrong. Virtue Payments makes it simple to implement a fully compliant surcharge program that protects your business while helping you save on processing costs.
Ready to offset your processing fees without the compliance headache?