When a consumer approaches a cash register and the clerk asks whether their payment will be made with cash or a card, that’s a clear sign that the merchant is charging an additional fee for credit or debit purchases.
In most states, such a charge is not illegal. However, businesses are required to inform customers that there will be an additional charge for credit or debit purchases. If the charge is not fully disclosed, the business could run afoul of state consumer protection laws.
In New Jersey, Acting Attorney General Matthew Platkin and the Division of Consumer Affairs have sent cease and desist warning letters to 14 service, retail, and restaurant operators to remind them of their duty to disclose the total selling price of a product or service, including any surcharges for using credit cards, debit cards, or pre-paid cards.
“Consumers deserve to know exactly how much they are paying for a product or a service, Platkin said. “Any card surcharges need to be communicated clearly and in advance.”
The trend started during the pandemic
More small businesses have begun charging a 3.5% fee to cover swipe fees used by card networks. During the COVID-19 pandemic, card purchases increased significantly. Cash transactions became rare because of a sudden coin shortage and the fact that consumers were actively trying to avoid handling physical bills.
At the same time, credit card networks increased swipe fees. Not only were businesses paying the fee on more purchases than in the past, but they were also paying a higher fee to the credit card processor.
Platkin says the Division of Consumer Affairs’ Office of Consumer Protection in New Jersey received more than a dozen complaints from residents about businesses that charged consumers fees for using credit cards, debit cards, or pre-paid cards.
What to do
When shopping or dining at a restaurant, consumers should stay alert for additional fees on card transactions. Check the receipt to ensure that the price that was charged matches the advertised or posted price of an item.
Consumers should also make sure that businesses are following the proper disclosure rules. Merchants should display the full price of a product or service, excluding tax, for each method of payment.
Consumers should also be wary of card surcharges that exceed the actual incremental cost of the processing fee, which is typically as little as 1% and as much as 5%.