Is a credit card fee illegal?

Are Credit Card Fees Illegal?

Credit card fees are an increasingly common way for businesses to recoup the costs associated with processing payments. However, there are some restrictions on when and how credit card fees can be charged.

Credit Card Surcharges

In the United States, credit card surcharges are generally legal. This means that businesses can charge a fee to customers who pay with a credit card. However, there are some restrictions on the amount of the fee that can be charged.

The Dodd-Frank Wall Street Reform and Consumer Protection Act, which was enacted in 2010, capped credit card surcharges at 4%. This means that businesses can only charge a fee of up to 4% of the total purchase price.

Debit Card Fees

Adding extra fees to debit card transactions is prohibited nationwide. This means that businesses cannot charge a fee to customers who pay with a debit card.

The Dodd-Frank Act also prohibits businesses from charging fees for debit card transactions that are routed through a PIN-based network. This means that businesses cannot charge a fee for debit card transactions that use a PIN number, even if the transaction is processed through a credit card network.

Exceptions to the Rules

There are a few exceptions to the rules on credit card and debit card fees. For example, businesses that are located in states that have laws that specifically allow credit card surcharges may be able to charge a fee that is higher than 4%. Additionally, businesses that are considered to be “small businesses” may be able to charge a fee that is higher than 4%.

Enforcement of the Rules

The Federal Trade Commission (FTC) is responsible for enforcing the rules on credit card and debit card fees. The FTC can take action against businesses that violate these rules, including imposing fines and other penalties.

Conclusion

Credit card surcharges are generally legal in the United States, but they are capped at 4%. Adding extra fees to debit card transactions is prohibited nationwide. Businesses that violate these rules may be subject to enforcement action by the FTC.