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What do I Need to Know about Credit Card Merchant Fees?

What do I Need to Know about Credit Card Merchant Fees?

Q: Why do retailers charge an extra fee for paying with my credit card?


A: Ready, set … charge! Credit cards have always been a popular way to pay for purchases and they’ve become even more prevalent in recent years. They’re convenient, easy to use and there’s no need to stress about having the cash you need on hand. You don’t even have to count on having the funds to cover the purchase in your checking account when you make the buy.


Unfortunately, though, using a credit card is not all fun and games. In addition to hefty interest charges and a debt trap that can be hard to escape, merchants often tack on an extra surcharge, also known as a merchant fee or a swipe fee, for customers paying with credit.


Here’s what you need to know about the credit card merchant surcharge.


What is the merchant surcharge?


The credit card merchant surcharge is an extra fee that retailers charge customers using a credit card to pay for their purchase. The fee is generally a percentage of the cost of the transaction and can range from 1-4% of the total bill. Merchants bill the customers for these surcharges to help cover the fees that the credit card issuers charge them for the transaction.


Credit card merchant fees are legal in most states. However, several states prohibit all credit card surcharges on purchases. Some states allow merchants to charge swipe fees, but impose restrictions, such as the 2% maximum in Colorado. It’s a good idea to familiarize yourself with your state’s swipe fee laws so you aren’t slapped with an illegal surcharge.


While merchant surcharges are legally protected under law, there are restrictions on how they can be applied. Merchants charging a credit card swipe fee are required to:


  • Clearly disclose that there is a surcharge prior to the transaction.

  • Display the credit card surcharge on the receipt.

  • Keep surcharges capped at 4% of the transaction, or the fee the merchant pays to the credit card companies, whichever is less.


In addition, if the retailer chooses to impose a minimum purchase requirement for all credit card purchases, this amount cannot exceed $10. The minimum also cannot be higher than the amount set by other merchants using the same credit card network.


It’s also important to note that credit card surcharges are legally protected, but debit card surcharges aren’t. You should never be charged a fee for paying by debit card.


How can I avoid the credit card merchant fee?


There are several ways you, as a consumer, can avoid the credit card merchant fee. First, you can choose to pay for your purchases with cash or debit card. You can also choose to take your business to retailers that do not charge a merchant fee.


Use this guide to learn about credit card merchant fees and how you can avoid them.

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