This clause permits one party to impose an additional fee or surcharge when the other party pays via credit card. The surcharge is typically a percentage of the transaction amount and is designed to offset the processing fees that credit card companies charge merchants. This clause matters because credit card processing fees can significantly impact cash flow and profitability, particularly for businesses processing high-volume or high-value transactions. However, the enforceability and legality of credit card surcharges vary substantially by jurisdiction—some states and countries prohibit them entirely, while others allow them only if disclosed clearly and in advance. Including this clause without understanding local regulations could expose you to legal liability or make the clause unenforceable.
Before including a credit card surcharge clause, research the specific laws in your jurisdiction and those of your counterparty. If surcharges are permitted, ensure the clause clearly discloses the surcharge amount or percentage before the customer commits to payment, and consider whether the surcharge is truly necessary given your profit margins. As an alternative, you might negotiate a higher base price rather than imposing surcharges, which often creates less friction in business relationships. If you do use surcharges, document your cost basis (actual processing fees) to defend the practice if challenged.
Frequently Asked Questions
What does this clause mean in simple terms?
This clause permits one party to impose an additional fee or surcharge when the other party pays via credit card.
Why should I care about this clause?
The surcharge is typically a percentage of the transaction amount and is designed to offset the processing fees that credit card companies charge merchants.
What are my options?
This clause matters because credit card processing fees can significantly impact cash flow and profitability, particularly for businesses processing high-volume or high-value transactions.
How does this affect small businesses?
However, the enforceability and legality of credit card surcharges vary substantially by jurisdiction—some states and countries prohibit them entirely, while others allow them only if disclosed clearly and in advance.