New York Cracks Down on Credit Card Surcharges

Feb 20, 2024Financial Literacy, News

Earlier this month, a New York state law went into effect that mandates merchants provide more transparency surrounding credit card fees. It limits credit card surcharges to the amount charged to the business by the credit card company, and requires businesses to disclose the total price of an item or service including card surcharges prior to checkout.

“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,” said New York Governor Kathy Hochul in a news release. “Transparency is crucial in building trust between businesses and communities and now patrons will be empowered to budget accordingly.”

The law does not apply to debit cards, and is designed to update New York’s existing legislation on credit card surcharges. According to the PYMNTS Intelligence/Patric study “How Consumers Perceive Surcharge Prompts,” consumers usually look at merchants that levy surcharges in a negative light. 

The study found that 14 percent of credit card transactions at local retail shops and restaurants had surcharges, and 11 percent of national or regional restaurants and 7.9 percent of national or regional retailers imposed surcharges. Roughly two-thirds of consumers said none or very few merchants they visited had disclosed surcharges prior to a purchase. 

The New York law is occurring as consumers nationwide struggle with credit card debt, as recent data from the Federal Reserve (Fed) shows that credit card balances increased to $1.13 trillion. The Fed also found that roughly 8.5 percent 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,” said the Federal Reserve Bank of New York’s Center for Microeconomic Data in a press release.

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