Who Pays the Credit Card Fees on Debt Payments?

A hand swiping a credit card through the processor.More debtors than ever are paying by credit cards or through apps linked to their credit card, but these come with a processing fee. Who pays the credit card fees on debt payments?

Until recently, New York banned merchants from burdening customers with a “surcharge fee” when they paid by credit card. The result left suppliers and service professionals paying the fees. Only six states in the U.S. ban merchants from passing the processing fee to consumers.

Fees and Loss of Profitability

Whether it’s for a competitive margin or to increase a bottom line, covering a credit card processing fee of 2-5% can be difficult to swallow and might mean the difference between profitability or not.

General Business Law section 518 says: “No seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means.”

Any seller who violates this provision can be charged with a misdemeanor, punishable by a fine not to exceed five hundred dollars or a term of imprisonment up to one year — or both.

Charging Fees to Your Customer

Due to a very recent decision, going forward New York merchants are able to charge customers for the credit card surcharges as long as the calculations are provided by the merchants.

To take advantage of charging the payor for the surcharge, the merchant must post the total price for the credit card purchase in dollars and cents so that consumers are not required to calculate the additional fee being imposed by the merchant.

Now that credit card surcharge fees can be charged to the customer, we recommend preparing for an increase in disputes. The best defense against losing payments as a result of a credit card dispute is having a complete credit and billing file. In addition to signed credit card authorizations to support all credit card charges, you have should also have signed contracts, signed purchase and change orders, signed delivery tickets, and sign-offs at a job site for any performed work.

If you need help revising your current policy or wish to collect monies owed, contact us