New York State passed a law in 2015 that allows businesses to charge customers up to 3.99% in surcharge fees to recoup credit card processing costs. Howard Nathan is a relationship manager for a business advocate company called Heartland. He says around 90% of businesses are doing it wrong.
"If you have a stand-alone credit card machine, and you’re swiping every Visa and Mastercard you get through it, you’re doing it wrong. If the receipt doesn’t specifically show the total cost of the purchase, and the total amount of the surcharge on it, you’re doing it wrong. If you don’t have prices on your door, your menu, and your counter at the point of sale notifying that you’re doing it, and only doing it on credit cards, you’re doing it wrong," he said.
There are many companies processing the charges, so how do you know as a business owner when you’re dealing with a reputable processing firm?
"You have to ask questions. Caveat emptor. Let the buyer beware. You need to ask the right questions, and if they can’t answer them, then obviously they don’t know. Don’t risk making a mistake. It could cost you thousands of dollars, or even the very existence of your business," said Nathan.
Nathan added that New York State and the IRS are taking a closer look at the charges, so if you think you’re doing it wrong, now is the time to correct the mistakes.
"If you’re doing this surcharging, and you’re accountant is still deducting your credit card processing bills, now you’re going to get into trouble with New York State and the IRS," he said.
Consumers should also be aware that the charges only apply to credit card sales, so if you’re being charged on a debit card, gift card, or prepaid cards, cancel the purchase and ask to have the charge removed. It’s also important to pay attention that you’re only being charged for the merchandise.
"How is the sales tax being handled, because you’re charging that surcharge on the entire transaction that you’re ringing up, which for most business owners in a small business. You do a $100 sale. You add the $8.75 for the Oneida County sales tax, it’s the entire sale including the tax, and now they’re tacking another three and a half to four percent on top of that. Where’s that sales tax money going?" said Nathan.
Most online purchases do not have a surcharge attached, but there are some legal exceptions.