As you are aware, effective April 15, 2023, Visa implemented a $1,000 non-compliance assessment for confirmed first time violation offenses. If the non-compliance issue is not addressed and/or found to continue, non-compliance assessments for subsequent violations could start at $25,000 depending upon the type of violation.
As a reminder and to assist with the mitigation of non-compliance assessments, below is a recap of the Card Brand rules for some of the most frequent merchant violations:
- Minimum/Maximum Transaction Amounts
- Cash Discounting
- Surcharging
- Convenience Fees
- Service Fees
Minimum/Maximum Transaction Limits
In order to minimize processing fees on lower dollar transactions, the card brands allow a Minimum Transaction Limit amount to be implemented for credit card transactions. The rules for implementing are as follows:
- Minimum Transaction Limit
- A merchant may impose a Minimum Transaction Limit on credit cards, however it MUST NOT be imposed on a debit or prepaid card.
- This requirement refers to the type of card presented for payment and not the method in which the card is being processed (PIN debit, signature debit, credit).
- Minimum Transaction Limit CANNOT exceed $10.
- The cardholder must be allowed to use their credit card for all transactions over $10.
- A merchant MUST disclose the Minimum Transaction Limit amount to be imposed by placing signage at both the entrance into the location and at the point of purchase.
- A merchant may impose a Minimum Transaction Limit on credit cards, however it MUST NOT be imposed on a debit or prepaid card.
- Maximum Transaction Limit
- A merchant may NOT impose a Maximum Transaction Limit on debit or credit card transactions.
NOTE: A debit card refers to a card that has a cardholder’s checking or savings account attached to it as a funding source for the transaction. The word “Debit” is usually printed on the card.
Cash Discounting
A merchant may implement a discount to customers who pay in cash rather than card however there are specific rules around doing so. The rules are as follows:
- The listed price of the good or service MUST be the price PRIOR to any discounts for method of payment.
- The discount would then be applied to the price at the point of purchase should the customer choose to pay in cash.
- Merchants are not permitted to post a price for cash, and then charge a higher price for cards at the point of purchase.
- A merchant MUST disclose the Cash Discount intent and amount by placing signage at both the entrance into the location and at the point of purchase.
Surcharging
A Surcharge is a fee assessed on credit cards to help recoup all or part of the cost of card processing.
NOTE: Surcharging rules apply to Visa, Mastercard, and Discover. Surcharging on American Express is only allowed via our American Express OptBlue program. (If you are interested in processing American Express OptBlue, please contact us for information on the program and eligibility.)
- Registration is required before implementing a Surcharge.
- Please contact your acquirer for details.
- Visa requires a Surcharge indicator to be included in the transaction.
- Please check with either us or your POS provider to ensure your device is capable of Surcharging properly and set up to send the indicator.
- Surcharging must NOT be charged on a debit card or prepaid card.
- This requirement refers to the type of card presented for payment and not the method in which the card is being processed (PIN debit, signature debit, credit).
- Surcharge can be charged in a Face-to-Face and non-Face-to Face environment.
- The Surcharge amount can be fixed or variable, but it must be charged the same on all card brands and all payment channels.
- Surcharging cannot exceed the cost of acceptance and is capped at 3%
- Note: The cap for Visa is 3% while Discover and Mastercard are at 4% and American Express OptBlue is 3.5%. Given that there is a rule requiring parity across all card brands, the cap of 3% must be utilized.
- A merchant MUST clearly disclose the Surcharge intent and amount by placing signage at both the entrance into the location, at the point of purchase, and on the transaction receipt.
- Disclosure must have the exact amount or percentage of the Surcharge.
- Disclosure must include a statement that the merchant is assessing the Surcharge and is only applicable to credit transactions.
- The cardholder must be given the opportunity to cancel the transaction without penalty after the Surcharge is disclosed.
- Surcharging is currently prohibited in Massachusetts, Connecticut, Maine, and Oklahoma (this list is subject to change without notice).
- Note: When assessing a Surcharge (in accordance with card brand requirements), please also consult your legal counsel as needed, to ensure that Surcharging is permitted by law as it varies by jurisdiction and may not be allowed or may have limitations.
- A Surcharge cannot be charged in conjunction with a Service Fee or a Convenience Fee. The intent and definition of these are a bit different and each has their own set of rules (see below).
Convenience Fees
Convenience Fee is a fee charged to cardholders as a way for a business to recoup some costs involved for offering convenient payment options to cardholders. The card brands rules for implementing a Convenience Fee are as follows:
- A convenience fee MUST only be charged when a true convenience for the cardholder is offered as an alternative payment channel to a customary payment channel.
- Convenience Fees are ONLY allowed in a non-face-to-face environment; NEVER in a face-to-face environment.
- The Convenience Fee MUST be disclosed to the cardholder prior to the charge being applied.
- A cardholder MUST be given the opportunity to cancel out of the payment/fee (without penalty) and the ability to use the same form of payment at a brick and mortar location (face-to-face).
- The Convenience Fee must be a fixed amount; a percentage is not allowed.
- A Convenience Fee can be charged on both credit and debit cards.
- No card brand registration is required.
- Convenience Fees CANNOT be charged on recurring transactions.
Service Fees
Service Fees are used by government and education merchants as means to help recoup the cost of accepting payments. This type of fee is only eligible for select government and education merchant types. The card brand rules for implementing a service fee are as follows:
- Registration with Visa is required in order to implement a Service Fee.
- Upon approval, Visa will assign a specific code that we will place into our system. This will indicate to Visa that the transaction has been approved for Service Fees.
- Only the following government merchant category codes are all eligible:
- 9211 – Court Costs, Including Alimony and Child Support
- 9222 – Fines
- 9311 – Tax Payments
- 9399 – Government Services (Not Elsewhere Classified)
- Only the following education merchant categories are eligible:
- 8211 – Elementary and Secondary Schools
- 8220 – Colleges, Universities, Professional Schools, and Junior Colleges
- 8244 – Business and Secretarial Schools
- 8249 – Vocational and Trade Schools
- The service fee can be a fixed or variable amount and charged on all payment channels.
- The fee must be disclosed to the cardholder prior to the charge.
NOTE: Service Fees are a term recognized and defined by Visa only. Mastercard, Discover, and American Express do not recognize this as a unique fee type and do not have separate requirements around it.
Please note that this material is provided for general information purposes only and does not constitute legal, regulatory, accounting, tax, or financial advice. Each situation is different and you should consult your own advisors before engaging in any activity discussed herein. This information is intended, but not promised or guaranteed to be, current, complete, or up-to-date. There is no assurance as to the accuracy or completeness of such information and no representation, warranty or undertaking is or purported to be provided as to the accuracy or completeness of such information.
Please contact a member of the Relationship Management team with any questions you may have regarding this communication.