Whenever you use a credit card, have you ever noticed a fee? That’s a credit card surcharge — a little fee that businesses charge to cover what it costs to process credit card payments.
Surcharging is allowed in Oregon, but with specific rules to follow. For example, the fee cannot be more than the cost to process the transaction or 4% of the purchase, whichever is lower. What’s more, the surcharge must be disclosed to customers at the time of a transaction.
Understanding these laws is vital for businesses that want to stay in compliance and consumers who want to be aware of any extra charges. In this post, we will discuss the credit card surcharging laws in Oregon, legislative updates, and best practices for being transparent and compliant.
What is Credit Card Surcharging?
A credit card surcharge is when a merchant imposes a slightly higher price on a sale when a customer pays with a credit card. This fee enables the business to pay the credit card processing costs passed on by the card networks (Visa, Mastercard, etc.).
For instance, if your bill is $100, you may notice a $3 surcharge, bringing the total to $103. This is not about profit — this is about recovering a cost associated with accepting plastic.
Surcharging is not required, but it is widely adopted by small businesses that don’t want to increase prices on all customers. It’s transparent and fair when done right.
Surcharging vs. Convenience Fees vs. Cash Discounting
Surcharge means that the merchant increases the price of a product or service to cover the cost of the card acceptance. Convenience fee means a fee charged for the convenience of paying for a product or service using an alternative payment channel or by another method other than the method used for. Cash Discount means a discount is offered to induce payment by cash, check, or similar means.
Example:
- Pay with credit? $100 + 3% fee = $103
- Pay with cash? You will pay only 97$, with a discount of $3.
Each works with different rules, so knowing the difference is important.
Overview of Credit Card Surcharging Laws in Oregon
Understanding the legal landscape of credit card surcharging in Oregon is crucial for businesses aiming to remain compliant and transparent with their customers. Let’s delve into the specifics.
Is Credit Card Surcharging Legal in Oregon?
Yes, it’s legal in Oregon, but only under a few conditions for businesses. While Oregon does not have an explicit state law allowing surcharging, businesses in the state still need to adhere to federal laws and card network rules. These also note that surcharges cannot be greater than the cost to process credit card transactions and must be communicated to the payer before the transaction is processed.
Relevant State and Federal Regulations
Several regulations govern the practice of credit card surcharging:
- Oregon Consumer Protection Laws: These laws require that any fees, including surcharges, be clearly and conspicuously disclosed to consumers to prevent deceptive practices.
- Truth in Lending Act (TILA): At the federal level, TILA mandates transparency in credit transactions, including the disclosure of any additional fees or charges associated with the use of credit cards.
- Card Network Rules: Major card networks like Visa and Mastercard have their own rules regarding surcharging. For instance, Visa caps surcharges at 3% and requires merchants to notify them in advance of implementing a surcharge program.
Key Restrictions and Limitations
When implementing a surcharge program in Oregon, businesses should be aware of the following limitations:
- Surcharge Cap: The surcharge must not exceed the actual cost of processing the credit card payment or 3% of the transaction amount, whichever is lower.
- Credit Cards Only: Surcharges can only be applied to credit card transactions. Applying surcharges to debit card or prepaid card transactions is prohibited, even if processed as credit.
- Disclosure Requirements: Businesses must clearly inform customers about the surcharge before the transaction is completed. This includes displaying signage at the point of entry and point of sale, as well as itemizing the surcharge on receipts.
- Tax Payments: In some cases, surcharges may be prohibited on tax payments. For example, the Oregon Department of Transportation may impose surcharges for certain transactions, but these are subject to specific rules and limitations.
By adhering to these regulations and best practices, Oregon businesses can implement credit card surcharging in a manner that is both compliant and transparent, ensuring a fair experience for consumers.
How to Implement Credit Card Surcharging Legally in Oregon?
If you’ve decided to put a surcharge for credit card users, how to make sure you’ve done everything by the book? It’s simpler than it sounds, particularly if you break it down into a few manageable steps.
Choose the Right Point-of-Sale System
The first thing you’ll need is a POS system that supports compliant surcharging. Not all systems offer this feature out of the box, so choose carefully.
Look for a system that:
- Automatically calculates the correct surcharge
- Applies the fee only to credit cards (not debit)
- Separates the surcharge as a line item on the receipt
Some popular options include:
- Square – Easy setup and built-in compliance tools
- Clover – Offers customization and surcharge toggles
- Stripe – Good for online stores with advanced rules
- Payroc, Stax, or Toast – Also surcharge-ready, depending on your industry
Before going live, double-check that the POS allows for clear disclosure and doesn’t add the fee to debit or prepaid cards.
Staff Training and Customer Communication
How you talk about surcharges matters just as much as the technology.
Start by training your team. Make sure they understand:
- Why credit card surcharging is used (to offset rising processing costs)
- When and how it applies (only to credit cards)
- What to say if a customer has questions
Here’s a simple script staff can use:
“To keep our prices low for everyone, we pass on a small fee when credit cards are used. You can avoid this fee by using a debit card or paying with cash.”
Put up signs at your store’s entrance and near the register. Use clear language like:
“A 3% surcharge applies to credit card purchases. No fee for debit or cash.”
Online businesses should display this message on the payment page before checkout is completed.
Ensure Compliance with State and Card Brand Rules
To stay compliant, you’ll need more than just a good system. Here’s a quick checklist to help:
- Register with Visa and Mastercard at least 30 days before starting
- Post clear signage at the entrance and checkout (both in-store and online)
- List the surcharge as a separate line item on receipts
- Never exceed 3% of your actual processing cost
- Apply fees to credit cards only (never debit or prepaid)
- Disclose the fee before purchase (not after)
It’s also smart to do a monthly audit. Look over a few transactions and receipts to make sure everything’s still compliant. If you use a third-party processor or merchant service provider, ask for regular compliance checks.
Setting up surcharging legally in Oregon takes some planning, but once it’s in place, it’s a smooth process. With the right tools and good communication, you can reduce credit card fees without frustrating your customers.
Benefits and Risks of Credit Card Surcharging
Adding a fee to credit card payments can be a cost-saving move for your business, but it comes with potential trade-offs. Before we get ahead of ourselves, it is important to do your due diligence. Here’s a closer look.
Pros for Businesses
1. Reduced Processing Fees
Credit card processing fees can be a silent profit killer. These fees can quickly add up for small businesses, particularly on high-priced tickets. By passing on a small fee (usually up to 3%) to customers who choose to pay with credit, you can recover that cost instead of absorbing it.
2. Transparency with Customers
Some businesses raise prices for everyone to offset payment processing fees. With credit card surcharging, you are more upfront about the fee — and only credit card users pay it. This allows you to remain transparent and fair, particularly to cash and debit-paying customers who won’t be affected.
When done right, it fosters trust, especially if you clearly explain the “why” of the fee.
3. Encourages Cash or Debit Payments
Surcharging can push customers to pay with debit cards or cash, payment types that have lower or no fees for you. This shift can lower your overall processing costs over time without having to push customers too hard.
Risks and Downsides
1. Potential Customer Frustration
No one enjoys being hit with surprise fees, especially at checkout. If customers aren’t informed about your surcharge upfront, they may feel deceived or upset. Even with signs, people don’t like feeling charged extra. This could result in poor reviews or less repeat business. A lot depends on how you communicate the fee.
2. Legal Exposure if Done Improperly
Laws for credit card surcharging vary by state, and there are rules from credit card companies like Visa and Mastercard as well. If you miss a demanded disclosure or charge the fee inadvertently to a debit card, you could find yourself on the receiving end of fines or legal action.
The most frequent legal mistakes consist of:
- Not notifying the card networks ahead of time
- Failure to provide clear surcharge signs
- Overcharging the legal margin of surcharge
To stay safe, closely follow both state rules and card brand guidelines.
Alternatives to Surcharging in Oregon
If you feel like credit card surcharging is too much of a headache for your business, never fear – there are other methods to control processing expense. Here are a few common alternatives that are legal, often customer-friendly, and easier for businesses to carry out.
Cash Discount Programs
Some businesses take the opposite side, offering a discounted price for cash payments rather than adding a surcharge for credit card use. This is known as a cash discount program, and it’s not the same as surcharging.
Here’s how it works:
- Prices listed include the processing cost.
- If a customer pays with cash, they get a small discount (usually around 3–4%).
This is a method for getting cash while staying absolutely within legal boundaries. But be sure you explain the price difference at the cash register and on the receipts.
Convenience Fees (For Online or Remote Payments)
A convenience fee is another possible — but it only works in certain circumstances.
This fee is tacked on for nontraditional payment methods such as online, mobile, or over-the-phone payments. The key rule? It has to be levied uniformly across all cards, not just credit.
For example, if you typically receive payments in person, a flat $3 fee to accept online payments might be considered a convenience fee. Just be careful, it must be a clear and fair disclosure.
Build Processing Fees into Product Pricing
Some companies jut increase the price of their product or service a tad to cover processing fees. There’s no line-item charge, no extra math at checkout — just a single price.
It’s easy to monitor and avoid the intricacy of registration and disclosures. And it is more seamless to consumers.
Conclusion
Credit card surcharging can be a small-business tool in Oregon. It’s one way to mitigate increasing payment processing costs, particularly with thin profit margins. But there are also rules that you cannot ignore.
Oregon does make it legal, but you’ll have to abide by state and federal rules as well as card brand rules. That includes disclosing fees upfront, registering with Visa and Mastercard, and staying within the 3% cap. You also cannot impose surcharges for debit or prepaid cards, even if they are run as credit.
Options like offering a cash discount program, convenience fee, or just including the cost in your pricing are all smart business decisions that spare the hassle of dealing with added layers of legalese.
Whichever way you go, you need to be transparent. Customers like honesty, and when you communicate plainly, you’re more likely to maintain their trust (and their business).
It is always best to speak to a legal or payment compliance expert before making any changes. That way, you can keep your attention on growing your business without worrying about landing on the wrong side of the law.
Frequently Asked Questions
1. Is it legal to add a surcharge for credit card payments in Oregon?
Yes, credit card surcharging is legal in Oregon—but only if you follow specific rules. You must disclose the fee clearly, register with card brands like Visa and Mastercard, and never apply the surcharge to debit or prepaid cards.
2. What’s the difference between a surcharge and a convenience fee?
A surcharge is added only when someone pays with a credit card. A convenience fee, on the other hand, is a flat fee for using a non-standard payment method, like paying online or over the phone. Convenience fees must apply equally to all card types.
3. How much can I charge as a credit card surcharge?
You can’t charge more than the actual cost of processing the transaction, and it must not exceed 3%. Going over that limit can put your business at legal risk.
4. Do I need to tell customers about the surcharge?
Yes. You must notify customers before they pay, including signage at your store and clear messaging during online checkout. The fee must also appear as a separate line item on their receipt.
5. Are there alternatives to surcharging if I don’t want to deal with legal steps?
Definitely. Many businesses choose cash discount programs, convenience fees, or build processing costs into their pricing to avoid the hassle of surcharge compliance.