Square User Agreement on Surcharge

Square might be revising their User Agreement on Surcharge as merchants in the United States and U.S. Territories will be permitted to impose a surcharge on consumers when they use MasterCard or Visa credit card starting January 27, 2013.

Network Rules currently prohibit you from (a) assessing a surcharge for the use of a Card in connection with any transaction, or (b) dispensing cash on any Card transaction.

Notice the word “currently” in the user agreement. Square might have to revise their User Agreement to comply with the new regulation.

California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas have laws in place limiting or prohibiting merchants from adding surcharge to credit card transaction.

Screen capture of Square User Agreement was taken on Sunday January 27, 2013 04:00 a.m. Pacific Time.

Square-Applicable-Network-Rules

Square-Card-Register

MasterCard and Visa Merchants are allowed to add Surcharges in the United States starting January 27th, 2013.

Starting January 27, 2013, merchants in the United States and U.S. Territories will be permitted to impose a surcharge on consumers when they use MasterCard or Visa credit card. Back in November 9, 2012, a U.S. judge preliminary approved to a proposed $7.2 billion settlement between merchants and Visa Inc and MasterCard Inc over credit card fees.

Credit Card Fee

From MasterCard:

Pursuant to a settlement of the U.S. merchant class litigation, MasterCard will modify certain rules and business practices to permit U.S. merchants to apply an extra checkout fee, also known as a surcharge, to customers who pay with MasterCard-branded credit cards. The rule change permitting such surcharging will go into effect on January 27, 2013. These fees are not allowed on Debit MasterCard or MasterCard prepaid cards.

From Visa:

What is a Surcharge?
A payment card surcharge is a fee that a retailer adds to the cost of a purchase when a customer uses a payment card.

Changes to Surcharging Fees in the United States
Beginning January 27, 2013, merchants in the United States and U.S. Territories will be permitted to impose a surcharge on consumers when they use a credit card.

Historically Visa has not permitted retailer surcharging, but allowing surcharging was a key provision required by merchants to settle long-standing litigation brought by a class of retailers in 2005.

This settlement takes effect on Sunday January 27, 2013 in the United States with the exception of the following 10 States where there are laws limiting or prohibiting surcharges:

  • California
  • Colorado
  • Connecticut
  • Florida
  • Kansas
  • Maine
  • Massachusetts
  • New York
  • Oklahoma
  • Texas

The amount of surcharges is limited up to 4%.

Merchants have been giving “cash discount” as workaround to MasterCard’s and Visa’s Operating Regulations against surcharging.

Cash Discount