More NJ businesses passing credit card fees to consumers

💳 More businesses are charging credit card fees in New Jersey

💲 State lawmakers want to make sure businesses do not profit from those fees

😠 Consumers hate the fees, but it appears they are here to stay

Whether you are out to eat or just buying something from a local shop, it's likely you will pay more with a credit card.

Credit card surcharges have increasingly become the norm in New Jersey and other parts of the U.S.

Typically, businesses are charged between 1.5% and 3.5% by companies that process credit card transactions.

Just a few years ago, many owners just absorbed the fees as the cost of doing business. As the economic slowdown due to the COVID-19 pandemic deepened, more businesses started passing those fees on to customers.

Passing on those charges is perfectly legal, and that is unlikely to change, no matter how much consumers hate the extra fees.

New Jersey is likely, however, to make sure that is where the surcharges end.

State Sen. Gordon Johnson, D-Bergen, says he has seen more businesses adding their own surcharge on top of the credit card fee.

Johnson is the sponsor of a bill that would make that practice illegal, and cap credit card surcharges at exactly what the business is charged for the transaction and not a penny more.

Both the Senate and Assembly passed Johnson's bill (A4284), and it now awaits a signature from Gov. Phil Murphy.

If Murphy signs it, it takes effect immediately.

Businesses would also be required to inform you how much you are being charged if you use a credit card and do it before you agree to a purchase.

Fees are really high

Some trade organizations have estimated credit card processing fees are the third highest operating expenses for restaurants.

Small businesses can pay tens of thousands of dollars a year in processing fees.

Consulting firm CMSPI says processing fees in the U.S. are among the highest in the world.

According to a Nilson Report, the average rate for Visa and Mastercard is 2.22%

Business owners complain those fees are non-negotiable, and come right off the top of all sales before any funds are credited into the business account.

There are alternatives emerging

Visa and Mastercard control about 80% of the credit card processing market, which amounts to a virtual monopoly.

Congress has been studying the issue for years and has been looking into the ways to foster greater competition and drive those fees down.

The Credit Card Competition Act failed to pass Congress last year. It would have required at least two different processing networks for credit cards issued by the nation's largest banks. That competition, supporters say, would drive down fees.

Critics claimed it would negatively impact consumers by costing them their rewards points.

The bill's sponsor vows to bring the measure back for a vote later this year.

At the same time, a growing number of trade organizations are offering their members alternative processing. In some cases, that could drop processing fees by 1% or more.

Report a correction 👈 | 👉 Contact our newsroom