Credit cards will change as a result of a newly updated law, and they will not be the same as usual in the state of New York. Governor Kathy Hochul signed the updated credit card surcharge law in December, and it will take effect on Sunday, February 11. Since the law went into effect on Sunday, businesses in New York have been required to clearly state the higher credit card price of an item and limit their surcharge amount.
As Governor Hochuel stated, credit card fees should never be a mystery to New Yorkers, and this bill will ensure that consumers are not charged unexpected fees while making transactions. Customers will now be able to budget appropriately, as transparency is critical to building trust between communities and businesses.
When you pay with a credit card at a restaurant or retail establishment, credit card companies charge a fee. In the past, businesses used to cover the cost of the fee, but it is now common for customers to pay that amount. Therefore, with the new law in effect, businesses will be required to disclose this fee to customers.
NY ditches hidden surcharges from credit cards
Businesses must choose between charging the same price for credit and cash, displaying the highest pricing, or displaying the price for both types of payments to abide by the new regulation. That being said, not every card in your wallet will be impacted, as the new law only covers credit cards and not debit cards.
The Division of Consumer Protection (DCP) of the New York Department of State stated in a letter to local government officials last month that consumer complaints about the number of firms adding surcharges were very constant, highlighting that most of the typical surcharge complaints ranged from 3-5%. Beginning Sunday, the updates, which do not apply to debit cards, aim to clarify credit card surcharge pricing for consumers by:
- Requiring businesses to display the total price of an item or service, including the credit card surcharge, or a two-tiered pricing option that includes both the credit card and cash price, before checkout.
- Limiting credit card surcharges to the amount that the credit card company charges the business.
Best practices for credit card fees
When it comes to companies informing their clients about credit card surcharges, some techniques are forbidden. Those who break the new law may be fined up to $500 for each infraction. Here is a detailed description of what businesses are allowed to do and what they don’t:
Allowed | Not Allowed |
| – List higher credit card prices next to lower cash prices. – List only credit card prices and offer cash discounts. – Change all prices to reflect credit card prices. | – Advertise cash discounts that do not apply to credit cards. – Include a credit card surcharge warning on the price tag/menu. – Charge separate fees for credit card use (convenience, service, technology, non-cash, administration, etc.). – Post signage announcing credit card fees applied to all sales.
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In case customers run into any issues with credit card pricing at the register, they should file a complaint with the DCP to receive a refund for any excess fees paid, with the New York Attorney General, or with local governments.
Will Congress end credit card rewards?
To promote competition in electronic credit transactions and possibly reduce retail costs, the Credit Card Competition Act was presented to Congress in 2022. However, opponents fear that it could limit the generous benefits and advantages that cardholders receive, similar to how debit cards have dried up. The measure was reintroduced in June 2023.
Potential consequences for your financial health
As credit card rewards are funded by interchange fees, which are determined by the payment network that the credit card uses (Visa or Mastercard), small business owners could find these fees expensive and punishing. Additionally, under the Credit Card Competition Act, banks would be required to provide businesses with more options for the payment network they use to handle card transactions. It also allows merchants to select from multiple networks, promoting competition and consumer benefits.