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Will Visa’s 3% Surcharge Cap Push Merchants to Cash Discounts?

Digital Transactions

Visa Inc. is poised to lower on Saturday the amount a merchant can surcharge for transactions on its credit cards from a maximum of 4% to 3%, a move it announced early this year. Some observers acknowledge the reduction will happen, though Visa Inc. has not responded to Digital Transactions News’ inquiries to confirm.

The move is all but assured, says Jeff Fortney, senior associate at TSG, an Omaha, Neb.-based payments-advisory firm. Merchants that want to surcharge will have no option but to comply with the 3% cap, he says. In Canada, the cap will be set at 2.4%, Fortney wrote in a March TSG blog post. Visa issued a bulletin in January about the reduction. Surcharging on debit cards, even if processed as signature debit, is not permitted. Doing so is a violation of the Durbin Amendment to the Dodd-Frank Act, which caps debit card costs, Fortney says.

he 3% cap may not cover a merchant’s total cost of credit card acceptance, but it may get the merchant to pay more attention to transactions it does surcharge.

Some merchants, whether knowingly or not, assess a surcharge on all cards, even though a consumer may use a debit card. That will result in fines, which usually are passed down from the issuer to the acquirer to the independent sales organization to the merchant, Fortney says. Fines for violating the regulation are based on each incident. Fines have been issued starting at $30,000 per incident. Post-April 15 fines will also be assessed for surcharging more than 3%, he says.

A recent TSG survey of 530 small businesses found that 58% said they have a clear understanding of surcharging, while 30% said they had heard of it, but lacked a full understanding of the practice, and 12% did not know what it was.

The impact on merchants will depend on automatic updates from their provider, says Jonathan Razi, chief product officer at Stax, an Orlando, Fla.-based payments provider. Razi had been chief executive of CardX, a Chicago-based surcharging platform that Stax acquired in 2021. Merchants can surcharge on point-of-sale and e-commerce transactions.

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