Like numerous other businesses, many camps charge an additional fee to offset the cost of credit card transactions. For camps with substantial annual revenue, implementing surcharges can result in significant cost savings, potentially reaching tens of thousands of dollars per year.
As surcharging becomes a more common feature of credit card transactions across industries, families tend to accept surcharges without objection (especially when they have the option to pay by check, ACH, or debit card with no fee). Considering these factors, implementing a credit card surcharge often makes good business sense.
From a legal perspective, charging customers credit card fees generally involves a few important steps and requires a review of applicable state law.
Overview of Legal Obligations
To add an extra charge for credit card transactions, we need to consider two different obligations: first, we need to make sure that the charge complies with the credit card companies' requirements; and second, we need to make sure that the charge complies with your obligations under applicable state law. Let's briefly explore both considerations.
Obligations to Credit Card Companies
Credit card companies have certain requirements before businesses can add credit card fees. In broad brush strokes, these requirements are as follows:
Notify each credit card company and your processor in writing that you plan to add a surcharge. This should be done at least 30 days before you start surcharging.
For example, here is Mastercard's surcharge notification form. This type of notification should be provided to each card company, unless a particular company has waived the requirement.
Your credit card processor may be able to help you inform the credit card companies that you're adding a fee, or you may have to do it on your own.
The surcharge amount should not exceed the lower of your effective rate for credit card transactions or 4%.
Your credit card processor should be able to tell you the surcharge rate based on how much they're charging you, and based on each credit card company's specific surcharge cap. You can't charge a higher fee than what the processor charges you.
You have to post a notice on your website about the surcharge along the following lines: "We impose a surcharge of XYZ% on credit card transactions, which is not greater than our cost of acceptance. We do not surcharge debit cards."
You should include the surcharge amount as its own line item on each invoice/receipt.
As noted above, your credit card processor may be able to help with some of these items, so the starting point is talking to the processor.
State Law Considerations
In some states, you'd be done after completing the above steps. Other states have more specific requirements. For example, in New York, businesses are not allowed to post a price and add a percentage surcharge for paying by card. However, businesses are allowed to list two prices: a credit card price and a check/debit price. The idea is that consumers should not do any math to figure out their price -- they should just see the actual cost based on their payment method. So, rather than using the disclosure language above, you'd use something along the following lines:
"If you pay by credit card, your tuition cost is $_____________. If you pay by debit card, ACH, or check, your tuition cost is $______________. Credit card transactions are priced ____% higher than debit card and ACH transactions. This percentage is not greater than camp's cost of accepting credit cards."
State law may have various other obligations and restrictions regarding the use of surcharges, which should be researched prior to moving forward.
Conclusion
From a legal standpoint, this overview is a general lay of the land. Before imposing a surcharge, you should consider the requirements of each card that you accept and your credit card processor, along with your obligations under applicable state law. Please note that the action items and sample language above are intended only as an educational reference point. Do not treat this article as legal advice and do not act or rely on this article without speaking to your attorney and reconfirming all applicable obligations.