Massachusetts, one of the few states where it is still illegal for businesses to surcharge customers for credit card payments, is considering new legislation that would reverse that policy. The proposal is the latest development in a broader pushback against rising credit card fees.
The Massachusetts bill, which passed out of committee last week, would allow to charge customers a fee for using a credit card, provided the surcharge doesn’t exceed the business’s actual cost to process the payment. Merchants that impose a surcharge would be required to clearly disclose the fee before payment, and the surcharge amount would have to be printed on the receipt.
The legislation also states that credit card companies cannot stop businesses from offering discounts to customers who pay by cash or check.
Who Ultimately Benefits?
Currently, Massachusetts is one of only three states—along with Maine and Connecticut—that explicitly ban credit card surcharging. While the bill is being framed as a win for both consumers and merchants, there is also much jockeying behind the scenes by payment networks, which have a financial stake in the outcome.
“It’s a contentious topic because the networks don’t like it,” said Ben Danner, Senior Analyst, Credit and Commercial at Javelin Strategy & Research. “Surcharging causes people to switch into different payment methods in order to not have to pay the extra fee. If they pay in cash, Mastercard and Visa lose out on that transaction.”
Consumers don’t like it either, especially younger ones. According to research from Javelin, roughly a quarter of consumers ages 18 to 44 say they would take their business elsewhere if required to pay a credit card surcharge.
Credit card surcharging can also push consumers toward debit cards. While the average credit card surcharge hovers around 2% to 3%, debit card surcharging remains illegal in all 50 states.
Trump Weighs In
The issue gained greater salience when President Trump, fresh off declaring a 10% cap on credit card rates, endorsed the long-stalled Credit Card Competition Act (CCCA). The law would allow merchants to choose from multiple payment networks.
Its stated goal is to break the current dominance of Visa and Mastercard, who control 80% of all payments, fostering competition that could ultimately lower costs for consumers. Laws like the Massachusetts proposal could put consumers in a position to see exactly how much their credit card usage costs and to choose their preferred payment networks accordingly.
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