Convenience with a Cost: The Real Price of Using a Credit Card

Despite the ease and popularity of using credit cards, many people are unaware of the hidden costs associated with them, which can vary depending on the state.

Credit card users, a sizable portion of the population, are gradually losing the protections against additional fees, with significant variations depending on state regulations. In some states, retailers have the authority to impose surcharges on customers for using credit cards. The surcharge rates vary by state, and there are states that prohibit stores from passing on these fees to customers, requiring the stores to absorb the surcharge costs themselves.

Recently, New York enacted legislation that permits stores to transfer credit card surcharges to customers. This could mean an additional charge ranging from 2.75% to 3.5% to cover credit card processing costs, usually facilitated through point-of-sale systems like Square and Toast. While these systems streamline the payment process for businesses and customers, they come with significant costs for the business owners. Customers may be aware of these surcharges but often accept them. However, these additional costs can accumulate rapidly in certain states, potentially resulting in a 3% increase in overall spending for credit card users. For many Americans, this is a reality they face daily.

In the case of New York, not allowing merchants to pass on surcharges to customers was deemed a violation of the merchants’ freedom of speech, protected by the First Amendment. Before opting for a credit card payment, it’s crucial to calculate the potential financial impact of these surcharges and determine if it’s a worthwhile trade-off. If you wish to avoid these extra fees, your best option is to use alternative payment methods like cash, which should not incur any additional charges. Debit cards are also exempt from these surcharges, offering a cost-effective payment option in the long term.