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Surcharging is Gaining Momentum as Anti-Surcharging State Laws are Lifted

Surcharges on credit card transactions could pick up momentum now that only three states effectively ban the practice, a panel of experts indicated Wednesday at a merchant-acquiring trade show. That momentum may benefit not only merchants wary of card-acceptance costs but also merchant-service providers that focus on surcharging as a business opportunity, the panel indicated.

Even recent publicity about litigation over the matter has lent impetus to programs offered by some independent sales organizations and other merchant-service providers that have chosen to focus on the matter. United TranzActions has focused on providing a Surcharging Solution, which makes implementation seamless for our current merchants.

Legal challenges have opened the door to surcharging in six other states that had made the practice illegal. The most recent case was that of Oklahoma, where the state’s attorney general in December said the ban was an unconstitutional restriction of free speech.

It is estimated that with these legal barriers out of the way, 94% of the U.S. population is open to surcharging. The opportunity takes on more urgency with indications that interchange costs on card transactions may rise for some merchants, given the news that Visa Inc. is making significant revisions to its network fee structure. Acquirers pay interchange but pass it on to merchant clients. With the prospect of rising fees, interest among merchants in the surcharge option is increasing.

While state bans may be falling, the card networks maintain rules that restrict the practice. Merchants, and not third parties, must do the surcharging, for example. Also, network rules do not permit surcharging on debit or prepaid card transactions. And they require specific disclosures on receipts in a font size no smaller than other matter on the document.