Bad Credit

New rules imposed this year by the state in an effort to let consumers know when they are paying a credit card surcharge at a store or restaurant, while well-intentioned, fall short of their intended goal and have left business owners reeling at a time when the post-pandemic recovery continues.

The end result of these new rules may just amount to a 4 percent “inflation,” as businesses simply increase prices across the board to account for the surcharge fees.

In a nutshell, the new rules state that if a business is passing the surcharge — typically about 4 percent of the bill — on to its customers, it must display either the higher price, with the surcharge, or both the price of goods or services with and without the added cost. The highest cost — with the surcharge — must be displayed by default, with a discount essentially offered to the few customers who still carry paper money.

For more than 10 years, businesses have been allowed to pass the fees they are charged by the credit card companies to pay for the service along to consumers. For years, businesses that did so posted signs near cash registers explaining their policy. But the state said the signs weren’t good enough and implemented the new rule.

State Assemblyman Fred W. Thiele Jr., who supported the measure, said the debate on the state level was between consumers’ right to know the full price of what they were paying for and the burden put on small businesses to implement the new rules.

While the idea of full disclosure is an admirable goal, the burden put on small businesses is perhaps greater than some lawmakers accounted for. It would be costly, both in equipment and man-hours, to reprice all the existing merchandise, store owners noted. Merchants also assert that two price stickers on an item, or a menu, would be confusing to many consumers.

Additionally, the prices, even the higher ones including the credit card fees, would not be the actual end cost of the goods or services, as the 8.625 percent sales tax would still have to added at the register.

Many business owners may shy away from the dual price display and simply add 4 percent to the overall cost of their products or services whether the consumer pays with a credit card or cash.

Sometimes the simplest solution is best: Let the businesses return to signs near the cash register — or multiple signs throughout the business — noting that a credit card fee will be added to the bill. Certainly, the state could dictate that the signs be a certain size, shape, and even how they’re worded to be noticed by the consumer and also leave no confusion about the charges.

It’s not clear that the state’s motivation was to benefit consumers — the legislation was championed by credit card processing companies, who stand to make big profits off its implementation if businesses embrace the practice as the new law dictates. If transparency and consumer protections are the goals, clearer and prominent signs would certainly accomplish both, without the disruptions caused by the new rules. It’s definitely simpler and less confusing than competing price tags.