Bill Would Let Businesses Shift Card Fees to Customers

As customers continue to turn away from using cash, businesses say credit card fees are hampering their margins. Last Wednesday, a bill to allow businesses to charge customers paying with cards for those fees moved out of committee with a favorable recommendation from senators.

Senators on the Committee on Consumer Protection drafted the bill (S 2819) that would allow sellers to charge customers paying with a credit card a fee that is no greater than the seller's cost to process the payment. If the bill passes, Massachusetts would join most states with laws allowing businesses to charge credit card surcharge fees. Five senators voted to advance the bill and Sen. Kelly Dooner didn't vote "yes" or "no."

The bill, which draws from three proposals (S 194 / S 204 / S 278), also requires sellers to notify customers of the credit card surcharge for in-person, online purchases and transactions made over the phone.

Sen. Pavel Payano, co-chair of the committee, said the bill offers “a practical path forward."

“One that supports our small businesses while making sure consumers are clearly and proactively informed about surcharges,” he said in a statement to the News Service.

The measure has support from restaurant owners who say credit card fees are a growing portion of their expenses since 2020.

Before the COVID-19 pandemic, credit card sales made up about 50% of the purchases at Turner Seafoods, which has three locations, owner Kathi Turner said. After the pandemic, credit cards are used in more than 90% of sales.

“Cash is almost being eliminated in the field, so it’s in some sense, a life or death to many, many small businesses,” Turner said during a June hearing on the proposals.

Research by the National Federation of Independent Business, which represents thousands of small and independent businesses, shows credit card fees are rising up the list of businesses’ cost drivers.

A 2024 NFIB report showed credit card processing costs were listed as No. 22 among top cost drivers and impediments to doing business. NFIB’s 2016 report found credit card processing costs ranked No. 38.

Chris Carlozzi, Massachusetts director of the NFIB, said credit card fees have more than doubled for small businesses since 2012, a change largely driven by inflation and post-pandemic spending trends.

Nancy DeFina, director of human resources and compliance at Niche Hospitality Group that operates five restaurant locations, said credit card fees are her third largest expense behind labor and cost of food.

“Every swipe has a significant fee to it,” she said during the June hearing, noting that the restaurant pays a fee ranging between 1.7% to 3.95% along with 15 cents per swipe.

Carlozzi also noted that the state’s law of allowing sellers to offer a discount for customers using cash has its challenges for certain industries. It could be burdensome for stores with a wide range of products or restaurants with long menus to create a range of prices. The bill would add notification requirements for sellers who offer discounts for customers to incentivize them to pay with cash.

Katie Castellani is a reporter for State House News Service and State Affairs Pro Massachusetts.