Recently I went to an independent coffee shop and purchased a vanilla latte and a scone for breakfast. They told me a price, which I accepted, but as I was using the terminal to pay with my credit card I noticed an extra $0.19 fee. I asked about it and he quickly proceeded to give me a quarter as a refund. Why should you care? Because this is actually an issue of consumer protection, freedom of speech, and small business competition!
California has a law, California Civil Code section 1748.1, that prohibits retailers from adding a surcharge when a consumer chooses to use a credit card instead of paying by cash. It says, "No retailer in any sales, service, or lease transaction with a consumer may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means." It also says, "It is the intent of the Legislature to promote the effective operation of the free market and protect consumers from deceptive price increases for goods and services". As a Californian, I've become used to this law (personally and in business). I believe that we should all play by the same rules and I've accepted credit card fees as a "cost of business".
As I was waiting for my coffee several other patrons bought coffee, paid with their credit cards, and incurred the fees. There was no signage to disclose the fee and they never mentioned it unless you noticed it on the receipt. This bothered me. So after the line died down I said something to the person behind the counter who happened to be the owner. I told him that this practice was illegal and his response was basically 'I know and I don't care'. He gave the common reasons about being a small business owner, the expense of the fees, and that customers appreciate that they accept credit cards, etc. Then he surprised me by trying to compare it to speeding on the freeway and that is wasn't a big deal. However, speeding is dangerous and if you get caught or have an accident there will be consequences. I told him that the consequence was that he just lost a customer (and I have not been back since).
What neither the coffee shop owner or I knew was that in March 2015, U.S. District Court Judge Morrison England ruled that this California law “is an unconstitutional restriction on plaintiffs’ freedom of speech and is void for vagueness.” California's Attorney General believes that "...this decision is incorrect and has appealed that order." However, as of now, the Attorney General cannot enforce the statute. This combined with the change in credit card merchant agreements in 2013 has lead to confusion on this issue. The coffee shop owner and I both thought he was violating the law but what he did not know was that he technically could impose the fee legally if he gave full disclosure prior to purchase.
The State of California Department of Justice Office of the Attorney General said on this matter, "Although the Attorney General is enjoined from enforcing this specific statute, California law does prohibit a merchant from engaging in activity that is unfair or deceptive. So, for example, if a merchant charges a credit or debit card surcharge or offers a cash discount, but does not fully disclose this to customers prior to their committing themselves to the goods or services, or if the merchant does not clearly explain its policies regarding debit and credit cards, the merchant may be violating California law."
This will likely be a topic of interest for many California small business owners in the years to come. Personally, I don't think it is wise to add additional fees to the customer that they may not understand or agree with. Major merchants are not imposing these surcharges and if small businesses adopt the practice they'll be putting themselves at a competitive disadvantage. In e-Commerce the popularity of 'fast and free shipping' has shown that customers like knowing what they'll pay without being surprised by extra costs at checkout.
If you do decide to impose the surcharge then don't do it in a way that is unfair or deceptive. Fully disclose the fee and educate the customer about the policy and the change in the law (and be prepared to discontinue the practice if the appeal is successful). I would also encourage you to watch and listen to see if you're losing customers by the policy. You might lose business to competitors who do not impose surcharges and there might be hidden costs for encouraging customers to use less secure payment means (such as cash or checks).
[Disclosure: I am not an attorney and this post does not represent a legal opinion on this matter.]