As businesses look for ways to offset rising payment processing costs, surcharging has become an increasingly relevant topic. However, applying surcharges in Canada comes with strict regulatory requirements that merchants must follow. This guide outlines the latest surcharging rules and regulations in Canada for 2024, ensuring compliance while maximizing cost savings.
What is Surcharging?
Surcharging refers to the practice of passing credit card processing fees onto customers by adding a surcharge to their transaction. Instead of absorbing these costs, businesses can charge customers an additional fee when they choose to pay with a credit card. With Rescue’s Pass The Fee technology, you can implement a surcharge program for in-person payments, online payments and integrated directly on your invoices.
Is Surcharging Legal in Canada?
Yes, surcharging became legal in Canada as of October 6, 2022, following a settlement between Visa, Mastercard, and Canadian merchants. However, businesses must adhere to specific regulations set by the card networks and provincial consumer protection laws.
Key Surcharging Rules in Canada (2024)
1. Maximum Surcharge Cap
- Businesses cannot charge more than 2.4% of the transaction amount as a surcharge.
- The surcharge must never exceed the actual cost of processing the credit card transaction.
2. Card Brand and Acquirer Registration Requirements
- Before applying a surcharge, businesses must register with Visa and Mastercard at least 30 days in advance.
- Merchants should also notify their payment processor (acquirer) to ensure compliance.
Rescue handles all of these requirements on your behalf.
3. Customer Disclosure Requirements
- Businesses must clearly inform customers of the surcharge before they complete the transaction.
- The surcharge amount must be displayed:
- At the point of sale (POS) for in-store transactions.
- On the checkout page for online transactions.
- On the customer receipt, showing the surcharge as a separate line item.
4. Restrictions on Debit and Prepaid Cards
- Surcharging is only permitted on credit card transactions.
- Businesses cannot apply surcharges to debit or prepaid cards.
5. Provincial and Industry-Specific Restrictions
Some provinces have additional consumer protection laws that may limit or prohibit surcharging. For example:
- Quebec: The Consumer Protection Act restricts businesses from adding fees beyond advertised prices, making surcharging effectively prohibited.
- Government and Regulated Services: Certain industries, such as healthcare and utilities, may have additional restrictions on surcharging.
6. Refund and Chargeback Considerations
- If a customer requests a refund, the surcharge must also be refunded.
- Chargeback disputes may be impacted if a surcharge was incorrectly applied or not properly disclosed.
Best Practices for Surcharging Compliance
To ensure compliance and maintain customer trust, businesses should:
- Follow Card Network Guidelines – Adhere to Visa and Mastercard rules for surcharge limits and registration. Have questions? We can help.
- Be Transparent – Display clear signage and provide disclosure on receipts.
- Use the Right Technology – Ensure POS systems and eCommerce platforms can properly apply and itemize surcharges.
- Monitor Changes – Stay updated on provincial regulations and industry-specific policies.
- Train Staff – Ensure employees understand surcharge rules and customer communication best practices.
Final Thoughts
Surcharging can be an effective way for Canadian businesses to manage credit card processing costs, but it must be done in strict compliance with the law. By understanding and implementing the latest surcharging rules and regulations in Canada (2024), businesses can remain compliant while maintaining transparency with customers.
For more details on setting up surcharges, consult with your Rescue Payments to understand how surcharging can work with your business.
