New York Imposes New Limits on Credit Card Surcharges

New York state has begun requiring merchants to provide greater transparency about credit card fees.

A state law that went into effect Sunday (Feb. 11) limits credit card surcharges to the amount charged to the business by the card company.

In addition, the law requires businesses to post — prior to checkout — the total price of an item or service including of the card surcharge or a dual-tiered pricing option. This requires the credit card price to be displayed as well as the cash price.

“New Yorkers should never have to deal with hidden credit card costs, and this law will ensure individuals can trust that their purchases will not result in surprise surcharges,” New York Gov. Kathy Hochul said in a recent news release.

“Transparency is crucial in building trust between businesses and communities and now patrons will be empowered to budget accordingly.”

The law — which applies to credit cards and not debit cards — is designed to amend and update New York’s existing credit card surcharge legislation.

Consumers tend to look upon merchants that levy surcharges in a negative light, as the PYMNTS Intelligence/Payroc study “How Consumers Perceive Surcharge Prompts” found.

“While surcharges may help balance sheets, they don’t do much for the reputation of merchants that charge these fees,” PYMNTS wrote last year.

“Given the finding that roughly two-thirds of consumers said none or very few merchants they visit had posted signs informing them of surcharges, or that cashiers had communicated surcharges before purchases, consumers have become more wary of what many consider a hidden fee.”

The study also found that 14% of credit card transactions at local restaurants and local retail shops involved surcharges, while 11% of national or regional restaurants and 7.9% of national or regional retailers also imposed these charges.

And while the study showed that few consumers will stop patronizing a merchant due to surcharges, 70% of cardholders transacting at retailers and 72% at restaurants said facing a surcharge negatively affects their view of that merchant.

New York’s new law is happening as consumers around the country are feeling increasingly pinched by credit card debt. Recent quarterly Federal Reserve data shows that credit card balances increased by $50 billion to $1.13 trillion.

The Fed found that on an annualized basis, about 8.5% of credit card balances have transitioned into delinquency status.

“Serious credit card delinquencies increased across all age groups, notably with younger borrowers surpassing pre-pandemic levels,” the Federal Reserve Bank of New York’s Center for Microeconomic Data said in a press release.