Credit Card Surcharge Rules for Hotels: Avoiding $25,000 Non-Compliance Fees
Understanding the intricacies of credit card surcharges, especially regarding the specific rules for hotels, is paramount for small to medium-sized lodging businesses. As the industry evolves, so do the regulations surrounding payment processing, making it essential for property owners and managers to stay informed and compliant with credit card surcharge rules. We’ll dive into the guidelines and highlight why adherence to these rules is crucial for the smooth operation of independent lodging establishments. You can reference the visual below to follow the key five stakeholders and flow in credit card transactions: the consumer (guest), the merchant (you), the issuer (guest’s bank), the acquirer (your bank), and the card network (Visa, AMEX, etc.). There is also a myriad of secondary stakeholders serving the key stakeholders in differing capacities, but we’ll cover that another time or you can read more here.
What is a Credit Card Surcharge?
Surcharging is a practice where merchants (your hotel) add an additional fee to credit card transactions to cover the costs of processing fees. This fee is passed on to the cardholder (your guests) and is separate from the main transaction amount. In the hospitality landscape, chances are you are either considering adding this fee OR are already doing so. In either case, you must comply with the most recent laws or risk placing yourself in financial jeopardy.
- Notification requirement: Your hotel must notify the acquirer (your bank) at least 30 days in advance of assessing surcharges, as opposed to notifying the card brand (i.e. Visa).
- Maximum surcharge amount: Lowered from 4% to 3% in the U.S. and U.S. territories effective April 15, 2023.
Following Hospitality Surcharge Compliance:
It’s important to recognize that surcharging is supported in the U.S. by major card brands like Visa, Mastercard, and Discover. However, it’s essential to be aware that surcharging is prohibited on American Express, Debit, and Pre-paid card transactions.
For hotels considering surcharging, it’s crucial to grasp the definitions and limitations associated with this practice. This includes understanding surcharge caps, return policies, disclosure requirements, and restrictions based on state laws. Additionally, merchants must adhere to processing requirements set forth by card brands, which may include registration and notification procedures. Visa, for example, enacts a $25,000 penalty fee PER TRANSACTION for non-compliant surcharging.
Visa:
https://usa.visa.com/Forms/merchant-surcharge-notification-form.html
Mastercard:
https://www.mastercard.us/en-us/surcharge-disclosure-webform.html
Recent Updates and Requirements:
Furthermore, merchants must register with card brands like Visa, Mastercard, and Discover to participate in surcharging. Clear disclosure of surcharge amounts on receipts and at the point of sale is also mandatory. Failure to comply with these requirements can result in fines and damage to the merchant’s reputation. Any booking engine worth it’s weight will provide the opportunity to configure custom messaging and configuration for your credit card surcharges.
Key Takeaways:
If you want to avoid the $25,000 penalties, take time to follow what we’ve laid out in this article, work with state laws, ensure your surcharges stay under 3%, and only apply surcharges on allowable card brands. Additionally, integrating a reliable payment processing solution like rezStream’s can streamline compliance efforts and provide peace of mind. Our payment processing integration is tailored to the unique needs of the lodging industry, offering seamless implementation and robust features to help you navigate credit card surcharging regulations with ease.