questionsdid you know you're about to get hit with credit…

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[continued]

If you live in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma or Texas, you're safe. It's illegal to charge a credit card surcharge in those states.

If you get hit with a surcharge that is outside these guidelines, go to www.visa.com/checkoutfees to fill out a Report a Merchant Violation Form.

There is also more info on the surcharge in general at that site.

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As far as I know, this has always been the case (maybe it is just a new disclosure requirement?). A lot of construction guys will charge 3% to pay with a credit card. A lot of pizza delivery places around me will charge a flat rate of $1 to pay with a credit card. Maybe these were technically not allowed previously?

And, as far as the illegality in those states, that just means that the cost is passed on to all customers, not just the credit card customers. In general, every cost incurred by a business is passed on to the customer plus a reasonable profit markup. Now, sometimes a company will sell something for less than it cost to produce but that is because they hope to make that up in another area (and maybe this model could apply to cash vs credit customers but I can't think of a way that could work)

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@benyust2: Surcharges have always been against the credit card companies' Merchant Services Agreement, so,yes, they were "illegal" in that sense. Merchants sued the major card issuers, however, and this new provision is a result of that suit. There's more to the legal background than that, but that's the part that's most important to me.

As to the "passed on to all customers," you're correct, in that all costs of doing business are ultimately paid by the customer; any business that doesn't do this doesn't last long.

Seeing that surcharge in print makes it a lot harder for both merchants and customers to pretend it doesn't exist. Part of the end result of the new legislation, therefore, will be to encourage companies to offer discounts for paying with cash and to encourage customers to ask/demand a discount for cash payments or to shop where merchants are more amenable to doing so.

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you're only likely to see this at smaller local merchants, the national chains are afraid of scaring customers away, while smaller local merchants typically pay higher processing fees for CC transactions than the big stores.

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Merchants (my undergrad for example) charged 3% to pay with a CC and gas stations charge more for gas if you pay with a CC. And I'm in CA.

????????

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I used to sell merchant accounts. In every merchant agreement it was forbidden to pass along the discount rate and/or the transaction fee.

As a business, if you had a complaint against you for passing on these fees the first time it was generally just a phone call or letter explaining that you were in violation of your merchant agreement. If you continued you could have your merchant account revoked. Chronic abusers had their merchant accounts closed and their SSN or Federal tax id was entered into a database prohibiting them from ever obtaining a merchant account again.

There are a few exceptions though. If you are a grocery store whose primary business is selling groceries, you cannot pass along the discount rate or transaction fee. However if you are a grocery store that processes third party payments for utilities, phone, cable bills etc. you can add a surcharge to offset the cost of collecting these payments.

So, primary business=no surcharge, 3rd party collections=OK.

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Thanks for the info. I won't be shopping at any shop that charges extra to use credit cards. I don't carry cash, and don't intend to start now to help someone else's bottom line.

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@magic cave: Wow, a rare time I am glad I live in Texas! However, local government does charge a surcharge to use a credit card to pay fees and taxes. Is local government exempt from this law?

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@okham: You're not going to help the business' bottom line by paying the surcharge. You are ensuring that if you pay with a CC that the cash customers aren't penalized for your convenience (like they are now). When a merchant has to pay the surcharge themselves, they simply raise the prices across the board for everybody.

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At mom and pop shops, I think it's much better to use cash (I do this regardless of whether they have the surcharge or not). You give them the money rather than shipping it off to Visa or AMEX. For chains/corporations, I use a card as the money won't stay local anyway. But I'm not on a high horse as I still buy stuff from Target, Costco, etc., I just try to keep it local when I can.

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@joshaw: I only use my CC. I never carry cash and don't use my debit card. I do this for 2 reasons: first, I get perks. Second, I'm protected from theft, extra charges, etc.

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@kylemittskus: Exactly! If a company charges the same for cash vs credit, there is not incentive to use cash like, as you mentioned, there are to use credit.

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@okham: You do realize that they have already been charging you that fee. It's built into the price of the item you are buying.

What retailers will now do is tack on an addition 1.5% - 4% as a credit card fee without adjusting the product prices and tell you that they've been "eating" that additional charge up until now.

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@barnabee: yeah, but some places here give a "discount" if you pay with cash.

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@pr0gr4m: Yep. But I want everyone to pay the same, regardless of method of payment. And do you really think that they're going to lower costs for cash purchases? They'll tack on a fee to the prices already in place, and if you want to pay with check, your bank will hit you with the fees.

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I always laugh when stuff like this comes up on forums, because one or several people ultimately bring out the old "businesses are just going to pass the cost on to the consumers" canard.
The reality is a little bit more complicated than that.

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@moondrake: Generally, yes. I'm not sure of the legal provisos involved, but every government entity I've seen (including those in my area) has an extra charge for accepting a credit card. In fact, most seem to have a charge for accepting a debit card as well.

Perhaps @bill7718 can help us out on this one?

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@stryker4526: not really... that's exactly how business works.

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"Illegal in New York and Massachusetts"
Hooray! I live in the sane states!

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@magic cave: Wait it's illegal to charge a payment surcharge fee in the state of Florida? Someone ought to tell that to the Tax Collector and the DMV. Every time I renew my tags I get hit with a nice $2 - $3 payment processing fee. I guess the rules don't apply to the government. :-/

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@magic cave: The government entities in my state, county, city use a third party payment processor. Since it is a 3rd party processor and not the government processing the payment it is legit. If it was the Government processing their own payments they couldn't do it.

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@kylemittskus: Gas stations actually don't charge more if you pay with a debit/credit card. They simply offer a "cash discount." I live in Florida and a lot of the Mobile gas stations have prices posted on their signage with the words "CASH DISCOUNT" listed below.

So technically, instead of a surcharge for debit/credit customers they offer a "discount" to their cash customers. Even though in essence it achieves the exact same thing as a surcharge.

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@jyoz22: Illinois does this too. See, the rates are set by law, and legally they must end up with the amount of the fee they are charging. Therefore, they MUST pass along the costs (the way their laws are written). Visa doesn't have an exception for governments, so Visa cards are not accepted at Illinois Drivers Facilities nor at state universities for tuition or fees.

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@omnichad: Wow! It all make sense now! I have always wondered why there is always a sign at the counter saying "Visa Not Accepted."

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I am actually starting a B&M business, and I am very much considering this.... As it promotes more Debit/Cash usage. That 1-4% makes a difference in the course of a years worth of sales.. Especially when my plan estimates at $250,000/yr (low end) to 345,000/yr (high end)..

Imagine 4% of 250,000 = $10,000 thrown away to the credit card companies.. It makes a big difference and being able to entice people to use cash will also bring the prices of the item down..

Target does this already with the 5% off Red Card

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@barnabee: Well heck. I live in Kansas and our county treasurer has a sign on their counter stating that they charge 1.5% extra for using a credit card. So if it's illegal in Kansas, how are they getting away with it? Oh wait, that's the government. That would probably explain it. The don't have to adhere to the same rules as the rest of us.

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@kylemittskus: Not really. Like I said, the reality is a bit more complicated than that. Not all businesses can just pass any and every cost increase on to the consumer. Common misconception, but still wrong.

@devexityspace: But, as I'm sure you're aware, that $10,000 isn't "thrown away," as offering people the convenience of paying with credit cards tends to attract much more business than in costs in fees. I forget the numbers, exactly, but whenever a shop transitions from cash only to accepting credit cards they usually see a sharp increase in sales.
Of course, accepting credit cards but giving people who might normally pay with cards incentives to pay in cash might be a "best of both worlds" kind of thing, but we are rapidly transitioning to a cashless society and soon I imagine there won't even be an option to not accept things like charge cards or Google Wallet or whatnot.

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@stryker4526: very true.. but my business will also accept PayPal/Google Checkout/AmazonPay as well. However for those they will still need to have that surcharge.

It's hard to stay afloat when 95,000/yr is expenses alone (before bank loan pay-off/investor pay-offs) happen.. so every bit counts. Most businesses have already been doing this... (Charge more to cover that 1-5%).. and the customer is none the wiser.

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Is that fee taxable? In other words, if you go to a store and pay a fee, do they charge sales tax before or after the fee is applied?

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Here is the floria law:

http://www.flsenate.gov/Laws/Statutes/2012/501.0117

It has a specific exclusion that allows for the government to charge a fee.

Charges imposed pursuant to approved state or federal tariffs are not considered to be a surcharge, and charges made under such tariffs are exempt from this section.

The word tariff is generic enough to cover a schedule of rates, fees or prices.

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@cengland0: I would assume it is a surcharge after taxes. As a charge on your VISA for $21.67 (after taxes for a $19.99 item for instance).. is what is going to the business through VISA services. I could be wrong, but then that 21.67 * 4% = an additional 87 cents, which is $22.54

What we could see from this law is stores reducing prices but adding the surcharge for credit card usage.. so that $19.99 item is now is now $19.20 plus an additional 4%if you use your credit card.

Or the prices will stay the same because ObamaCare is putting a heavy toll on small businesses and large businesses alike.. and we will just have to deal with it..

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@jyoz22: see the response just under your comment from @bill7718. I suspect Florida is also using a third-party payment processor.

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@omnichad: Which may be why the University of North Florida doesn't accept Visa.

I'm learning a lot from this discussion!

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@devexityspace: I always have a difficult time considering a business with 50 or more full-time employees to be a "small business." My personal idea of a small business is the card shop I patronize, which has an owner-employee and four other full-time workers.

You just have to love legal definitions, hmm?

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@magic cave: very true-- but I know of 1 very specific business right now that employs 120 employees (most of which got hours cut) to get under that magic #50.

A small business IMO is a local business. (not a regional/national level).. By the time I open my 5th shop I will have 50 full time employees, and so long as I am able I will give them full time & benefits & bonuses.

However if the economy worsens, I will have to do the same as others have done and reduce hours/increase employees to cover the loss in revenue..

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@magic cave: Apparently the size standards to qualify as a small business depends on your North American Industry Classification System (NAICS) code and the dollar amount of your annual revenue/receipts.

http://www.sba.gov/size-standards-tool?ms=fp

I looked up a Museum (712110) with revenue of $1,000,000 a year and it is a small business. Size Standard is 7 million in annual receipts for this business type.

Greeting Card Retailer (453220) with revenue of $1,000,000 a year is not a small business.

* A Wholesale Trade or Retail Trade business concern submitting an offer or a quote on a supply acquisition is categorized as a nonmanufacturer and deemed small if it has 500 or fewer employees and meets the requirements of 13 CFR 121.406.

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@devexityspace: I love to hear stories of folks who grow their businesses as you have. I'm in the hometown of Firehouse Subs and have watched them grow from their earliest days. I really hope you don't have to reduce hours or employees; access to affordable health care is finally within reach for millions, and with any luck there'll be a way to make it work for both you and your employees.

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@cengland0: The mind boggles. Twice. Thanks for your research; my own brain still thinks there are substantial differences between museums and my neighborhood card shop in how they approach their problems and search for solutions.

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@jensownzoo: But your response assumes businesses will drop their current prices (which include the cost of allowing credit card purchases), and then throw the credit card fee on top of that. @okham is assuming prices will stay as they are and an additional credit card fee will be levied on top of that, essentially making the customer pay the credit card fee twice (since, again, it was built in to current pricing).

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@devexityspace: Accepting debit is as good as credit for me. I don't carry cash. But anything over $100 I feel more comfortable buying on credit and paying off later in the month, to give me a little float in my budget in case things get tight.

But don't go to cash only or you'll lose a lot of business. And I wouldn't pay a surcharge either, unless it was a small purchase (under $10) at a small retailer. I had wished for a long time that stores could charge a small fee for credit cards for purchases under $5 so I wouldn't feel guilty for wanting to use a card for convenience. Hopefully a lot of small stores adopt this, but only for small purchases under $x.

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@omnichad: I live in Illinois too and our Drivers Facility (or Secretary of State, or whatever the crazy people in Illinois call it instead of the DMV) started accepting Visa about a year ago. Up until then it was really frustrating that they didn't.

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My credit card gives me $1 in perks for every $60 I spend, or in other words a 1.67% "discount." If I encounter a credit card fee at a retailer under that 1.67%, I still come out ahead by using credit since I'd get $61 worth of value for $61 credit, as opposed to $60 worth of value for $60 cash.

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@smallbigtall: The rewards cards actually cost more to process, and those "discounts" get passed directly as costs to the merchant in the form of higher processing fees.

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@omnichad: That may very well be the case, but the math still stands. If a fee larger than 1.67% is passed on to me, then no deal.

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Anyone paying 4% on your credit card transactions is getting ripped off. There are so many processors that charge 2.5% or less. When looking last year for my wife's business, we found, and went with one that was under 2%. There were some restrictions as far as volume minimums and maximums, but it fit perfectly. Sure beat the 3% she was paying thru the typical bank.

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@magic cave: Oh yeah they do. The state uses "Official Payments Corp." to process their payments. It's odd the Tax Collector does accept VISA when payment is processed online, but not in person.

Also, You said UNF doesn't accept Visa. However, USF does... however they only do so when you pay online (and you get hit by a nice $10 surcharge!).

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@jyoz22: I wonder if the thing with the tax collector has to do with encouraging folks to pay online? Perhaps it's cheaper for them to process online payments and eat the cost than it is to have a person handling the transaction over the counter?

Gah! It all makes my head hurt!

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@jkaleda: Won't matter now. Any small business can just pass the costs on instead of finding a better deal. There will be at least a few that go this route instead of shopping around.

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And then there are the corporations who offer their own credit cards. They never charge extra for them because they get 18-22% in interest for their use, much more profitable than the core business. A number of others issue their own Visa or Mastercard, backed by the big banks (i.e. Citi) and get a nice profit for their use, even at other businesses. Even Woot parent Amazon does this.