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Education

Making the most of the rules: brands and state attorneys general
should these practices cross the line.
Passing on credit card fees The biggest winners, then, will be the
companies that build durable books
By Evan Weese of business by getting on the right
side of the rules. To get started, there
CardX are some important things to know.

ith tremendous momentum for passing on the credit card fee Regulatory trend
‒ whether in the form of a surcharge or cash discount ‒ it's no
surprise that ISOs, merchant level salespeople and merchants are Landmark changes to the card
W asking what these rules mean to them. brand rules and state laws mean that
businesses in 43 states (for details, see
Last year, American merchants paid $77 billion in fees for accepting credit www.cardx.com/compliance#statelaws)
cards, according to "Airlines cash in on loyalty credit cards," by Andrew Tangel are now able to pass on credit card
and Alison Sider, The Wall Stret Journal, Aug. 27, 2018 (www.wsj.com/articles/ surcharges, which has long been
airlines-cash-in-on-loyalty-credit-cards-1535362202). These costs, however, are standard practice for government
shifting more and more to the consumers who choose credit for convenience or and education institutions.
rewards, as the buzz at every industry convention attests. And this trend will
disrupt the traditional processing incumbents and create a new paradigm ‒ In its historic Expressions Hair Design
with new winners and losers. v. Schneiderman decision, the U.S.
Supreme Court held in 2017 that state
With the United States increasingly adopting Australia's model ‒ where 42 "no-surcharge" laws are regulations
percent of all merchants and a full 60 percent of large merchants pass on the of constitutionally protected speech,
credit card fee today ‒ we can expect to see more enforcement from the card setting the table for acceptance in all
50 states.

The shift toward surcharging
comes at an opportune time, as the
payments landscape has become
heavily commoditized and ISOs race
to the bottom in terms of profitability
(for further discussion on this, see
"The realities of margin compression
‒ and what to do about it," by Evan
Weese, The Green Sheet, Aug. 27, 2018,
issue 18:08:02). These new solutions
allow ISOs to move past rock-bottom
pricing and compete on product
benefit, which adds to margin and
retention.

Merchants seeking to surcharge
must satisfy not only state regulators,
but also the policies of card brands,
such as Visa and Mastercard. These
important requirements include:

• The merchant must be
registered with the card brands.

• The merchant must inform
customers of the credit card fee
with appropriate signage at the
store entrance (if applicable)
and at the POS.
• The amount of the credit card
fee must not exceed 4 percent
of the transaction, and the mer-
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