Is it legal to charge a credit card surcharge in Texas?

Decoding Credit Card Fees in Texas: Surcharges vs. Discounts

Navigating the world of credit card fees in Texas can be a bit confusing. While you might see businesses adding extra charges for credit card payments, it’s important to understand the subtle, yet significant, difference between a surcharge and a discount. In Texas, one is permissible, while the other is strictly prohibited.

The key takeaway is this: Surcharging credit card transactions in Texas is illegal. Section 339.001 of the Texas Finance Code clearly prohibits merchants from imposing a surcharge specifically for using a credit card. This means a business cannot add an extra percentage or fixed fee on top of the purchase price solely because the customer chooses to pay with a credit card.

However, this doesn’t mean businesses are powerless to manage the costs associated with processing credit card payments. Texas law allows for alternative approaches, namely cash discounts and convenience/service fees.

The Cash Discount Route: This strategy incentivizes customers to pay with cash by offering a lower price. Essentially, the advertised price reflects the cash discount, and customers using credit cards pay a higher price, which is framed as the regular price. This is perfectly legal and a common practice. For example, a gas station might advertise a cash price of $3.50 per gallon, with a credit card price of $3.60. This isn’t a surcharge on the credit card transaction, but rather a discount for paying with cash.

The Convenience/Service Fee Approach: While surcharges tied specifically to credit card usage are forbidden, businesses can implement convenience or service fees under certain conditions. These fees must apply to all payment methods, not just credit cards. For example, a business might charge a flat $2 service fee for all transactions, regardless of whether the customer pays with cash, credit, or debit. The key is that the fee must be universally applied and not specifically targeted at credit card users.

Transparency is Key: Regardless of the method chosen, transparency with customers is crucial. Clearly displaying the pricing structure, whether through signage, online disclosures, or verbal communication, is vital to avoid confusion and potential legal issues.

Why the Distinction? The rationale behind allowing discounts and universal fees while prohibiting surcharges lies in promoting fair pricing practices and consumer protection. Surcharges can be perceived as punitive towards credit card users, while discounts and universal fees offer more flexibility and transparency in how businesses manage their payment processing expenses.

If you encounter a business you believe is improperly adding a surcharge to your credit card transaction in Texas, you should document the transaction and consider contacting the Texas Attorney General’s office to file a complaint. Understanding the nuances of these regulations empowers both businesses and consumers to navigate the landscape of credit card fees in Texas effectively and legally.