Credit card issuers charge merchants a processing fee for each transaction they accept using their respective cards. These fees add up fast, can ultimately cut into a business’s profits, and can even lead smaller businesses to choose not to accept credit cards at all. This is also why it’s common to see stores refuse Discover and American Express since these two companies tend to charge higher processing fees. These processing costs can be especially difficult for businesses with low profit margins and, increasingly, are leading merchants to pass that cost on to customers. By adding a surcharge for credit card users at the time of their purchase, businesses are hoping to offset the profit loss on the transaction.
Merchants can’t charge customers more than the cost of accepting the card or 4%, whichever ends up being lower (and if the processing fee a merchant ultimately has to pay exceeds that 4%, they’re on the hook for the difference). The problem is, these added fees are often not displayed or communicated clearly to customers until after a purchase is made. Plus, these fees are ultimately not required and are entirely the choice of the business at the expense of customers. With that in mind, 10 states (California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas) have outright banned these kinds of fees so it’s important to be wary of any businesses operating in these states that are still attempting to charge processing fees.