Businesses are increasingly adding surcharges for credit card purchases

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This once illegal practice is being used by recovering businesses to recoup swipe fees

The economy is reopening, restaurants are at full capacity in most places, and retail stores are beginning to get crowded.

But look closely at your credit card receipt after your next night out or shopping trip. Chances are, there could be a credit card surcharge tacked onto your bill.

According to MyFico, businesses that were hard hit during the pandemic are trying to regain their footing by adding a surcharge to credit card purchases to help cover the swipe fee. Networks like Visa and MasterCard make money by charging fees to businesses every time a consumer pays with a credit card.

These fees can vary but most often range from 1.5% to 3.5% of the transaction. This cuts into a business’s profit margin, especially when it’s a small purchase.

When times are good, the business may absorb the fee or add it to the purchase price. But in highly competitive businesses they don’t always think they can do that. Adding a surcharge is a way to recoup the fee without raising prices or lowering profits.

They weren’t always legal

Surcharges weren’t always legal. A series of court decisions, including a 2017 ruling by the U.S. Supreme Court, made it legal for businesses to tack on credit card surcharges in every state except Colorado, Connecticut, Kansas, Massachusetts, and Puerto Rico.

Consumers can get around the surcharge by paying cash, something that fell out of favor during the pandemic. Some small businesses may display a sign at the cash register requesting cash payments instead of plastic.

Fortunately, surcharges are not applied to debit card purchases. Paying with a debit card keeps the convenience of plastic while avoiding the surcharge.

Some consumers may overlook surcharges as insignificant. After all, a 3% fee on a $20 purchase only adds 60 cents to the bill. If you’re using a rewards credit card that pays 3% cashback, you’ve broken even. Some consumers may consider it a worthwhile payment to help their favorite restaurant get back on its feet.

Businesses don’t normally advertise the fact they tack on a surcharge. There’s usually no way to know until you’re made that first transaction, then closely examined the receipt.

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