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Credit cards are a commonly accepted form of payment from clients or patients for services rendered. Business owners pay credit card processing fees on a monthly basis when credit cards are used to pay for services. In fact, having a quantity of cash on hand is a rarity for most consumers. Instead, most purchases and payments are made almost solely with a debit or credit card. The processing fees charged can be extremely high and a common thought is: who is ultimately responsible for those fees? 

In order to cover overhead costs, some businesses try to pass along credit card fees to their end user/customer. Typically, credit card processing fees can be anywhere from 1% to 5%, depending upon the type of credit card (Visa, MasterCard, Amex, or Discover). Keep in mind that these fees are directly related to what’s charged on the card, and such, it can get very expensive to continually pay these credit card fees when the business is predominantly accepting credit cards for payments. 

So the real question is: How can you pass along that processing fee to the end user? 

In the state of New York, passing along credit card processing fees to the end user, customer, or patient, which is known as surcharging, is generally prohibited. However, there are ways around this that are legal and are allowed under the law. 

Some ways to avoid being in violation of the surcharging law in New York State are as follows:

Charging a higher price for the services that are being rendered so that the end user is on full notice of the price. The price must be transparent and advertised to the public in plain sight.  For example: The business typically charged $100 for their service and is now increasing their charge to $105.  This updated charge may now incorporate a 5% credit card processing fee. The higher rate of $105 is charged in order to compensate for that 5% credit card fee. 

However, when advertising and putting the end user  on notice, the business cannot advertise that the increase is due to the credit card processing fee. This is critical because if advertised, the business will be in violation of the New York State law of surcharging.  

Providing a Cash Discount There are many businesses that may not be able to increase their fee. For example, practitioners who accept insurance cannot change their fees, but the patient is paying their copays or their balance with  their credit card. Understand that as a whole, a business cannot legally state that they are charging a percentage or a fixed amount for credit card processing fees (i.e. $5 or 5% in addition to the fee). 

A business can do the following: display $105 as the fee, and then  clearly indicate that there is a $5 or 5% discount for cash payments. This way, it’s clear that paying cash will result in a lower fee than if using a different form of payment, such as credit cards. 

When doing this, please note the following:

  • The fee is clear to the end user. It needs to be noticeable and not hidden from the public. 
  • Notify the end user of the total fee prior to the time of payment. This is very important, otherwise the end user could claim that they were not properly notified of the fee being charged.
  • The fee applies to the public at large and everyone will be charged the same amount for the same service.  The business cannot make exceptions to this rule.

When charging the fee, do not indicate that it is linked to the credit card processing fee. 

It is advisable for all businesses who accept credit cards for payment and who may want to pass the credit card processing fee to the end user to keep the above in mind.  Businesses should speak to their attorney to understand exactly how to do this within the parameters of New York law. If your business is outside the State of New York, check the laws of your local state to see what you are permitted to do when it comes to passing along these fees to the end user.