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The example is ACME Company has a payment processing system that companies X, Y, and Z can use. It enables more features than just "payment" processing, and it enables more than just "credit card" payments. However, ACME Company wants to avoid adding a surcharge into the model for the customers but needs to charge the Slip Credit Card processing fee and still make a profit. So it wants to charge a 10% fee to the company requesting to use the payment processing function of its service.

So Jon Doe goes to company Z and buys a widget using his credit card for $100 USD. Company Z uses ACME's service, so ACME takes $10 and transfers $90 into the bank account of Company Z. Company Z ships the product.

Somewhere along this beautiful interaction between buyer and seller, ACME company needs to charge that fee. Is that fee legal? Some states prohibit the use of Convenience Fees and Transaction Fees, does that prevent the company to company transactions or is that just buyer to seller.

Many payment processors like Paypal, Stripe, Visa, and Master Card all charge a transaction fee to the business. Therefore the company calculates it's pricing to reflect the cost to the consumer. Generally, consumer's are unaware that Mastercard, Visa, AMEX, Stripe, and PayPal all charge a processing fee. If the consumer new, the consumer would opt for the lowest percentage transaction fee. This is why many of those companies tell business to eat the cost.

My question, in the example provided above, is it lawful for ACME company to charge a 10% fee? If so, legally should it be called a "Transaction Fee" or a "Service Fee?" If not, does that mean all those fees from Mastercard, Visa, AMEX, Stripe, and PayPal are illegal? (in some states and countries)

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Credit card surcharges, where a customer is charged extra for using a credit card, are prohibited in 11 states. There are also 10 states that allow merchants to offer cash or non-credit discounts, and at least in those states there is increased awareness among consumers that credit card companies charge fees. There is no law requiring credit card companies to offer their services for free, so yes, it is legal for Visa et al. to charge vendors for using a credit card. There is no principle of law that dictates what such a fee would be called, so "Transaction Fee", "Swipe Fee" and "Service Fee" are all equally good.

If Visa were to charge 10% to vendors, they would probably lose all of their business, but it would not be illegal.

  • To clarify a vendor, such as Stripe (which is a credit card processor) and Visa can charge the vendor any fee. However this fee, as a general rule of thumb, must be hidden from the consumer (thus baked in cost). – JustinKaz Oct 7 '18 at 10:46
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In Australia this is governed by the Competition and Consumer Amendment (Payment Surcharges) Act which bans excessive payment surcharges. Basically, the vendor can recover the costs that the payment method incurs.

The ban only applies to EFTPOS, MasterCard, Visa and America Express “companion” cards (i.e. issued through an Australian financial service provider not through American Express directly). The ban does not apply to BPAY, PayPal, Diners Club and American Express or the taxi industry (regulated at a state level).

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