Is it legal to charge a 3% credit card fee in California?

Legality of Credit Card Fees in California

In California, the legality of charging customers credit card fees is governed by Civil Code section 1748.1. This statute prohibits businesses from imposing surcharges or “convenience fees” for customers who pay with credit cards.

Surcharge and Convenience Fee Prohibition

According to Civil Code section 1748.1, it is illegal for merchants in California to charge customers an additional fee for using a credit card. This prohibition applies regardless of the amount of the fee or the type of credit card used.

Permissible Processing Fees

While surcharges are prohibited, merchants may still charge a separate processing fee to cover the costs associated with accepting credit cards. However, this fee must be:

• Disclosed to customers: The processing fee must be clearly and conspicuously disclosed before the transaction is completed.
• Separate from the purchase price: The fee cannot be included in the price of the goods or services. It must be presented as a separate charge.
• Reasonable: The amount of the processing fee must be reasonable and commensurate with the actual costs incurred by the merchant.

Compliance and Enforcement

Businesses that violate California’s credit card fee law may face penalties, including:

• Fines and penalties imposed by state agencies
• Civil actions brought by consumers
• Loss of customers and reputation damage

Conclusion

Understanding the legality of credit card fees in California is essential for businesses operating in the state. Surcharges are strictly prohibited, while merchants may charge a separate processing fee that meets the requirements outlined in Civil Code section 1748.1. Failure to comply with this law can result in legal consequences and damage to reputation.