Common Legal Issues for Your Business Surrounding Card Payments 

For any business owners nowadays, card payment machines are necessary to pay by credit card or debit card; not everyone carries or pays by cash anymore. However, for a business like yours, it is essential that your customers have a payment method to pay you other than cash. Your customers may not always carry cash, so you must have some form of electronic payment method. If you decide to use a card payment reader for debit cards or your credit card payments for your transactions, there are legal issues associated with it you should be aware of. As a business, you must understand and abide by rules which affect you, such as paying transaction fees, associated with credit card machines, some of which protect your customers. This article will, therefore, explain some of the typical legal issues a UK business faces with card payment machines.

Card Payment Machines 

There are a variety of card payment machines on the market nowadays for businesses to choose from. These can allow your customers to pay, for example, by:

• chip and pin;
• contactless; and 
• mobile payment.

Card machines will vary in terms of their features, upfront costs and any ongoing fees your business has to pay. The upfront costs will usually be for the payment of the device, and the prices are a percentage of each payment you take from customers. 

When you, as a business, use a card payment machine, you may face legal issues, and we explain some legal issues you need to know below. 

Rules for Card Readers

You must be aware that there are rules in place for card reader providers that are there to protect you. Last July, new laws came into effect, which mean:

• your card reader provider must inform you when your contract is about to expire;
• card reader contracts cannot be longer than 18 months; and
• it is easier for you as a business owner to compare prices and card reader providers.

Surcharging

As a business, a typical legal issue you face is surcharging. This is where a business decides to increase the cost of a purchase from their website to cover the costs of the card processing fee they have to pay. However, it is illegal for your business to charge customers a surcharge to cover the cost of the card processing fee.

Minimum Card Payments

A typical legal issue a UK business like yours may face with card payment readers concerns minimum card payment amounts. This is the lowest transaction cost you will accept payment by card. Sometimes, businesses are unsure whether it is legal to have a rule of minimum card payment in the UK. However, having a minimum card payment amount for your business is legal.

You may want to implement a minimum-amount policy for your customers’ card payments when they purchase from you. This is because you have to pay card processing fees when your customers pay by card payment machine and a small payment may make it not worth the fee. Typically, minimum card payment amounts can vary between £5 and can be as high as £20. As your customers cannot pay in cash where payment is less than any minimum card payment, you need to have an alternative way to pay. For example, you may offer your customers the option of completing the transaction via PayPal or by bank transfer.

If you decide to introduce a minimum purchase amount for bank card transactions, your business may be affected by the rules certain card networks have in place. These companies do not allow you to have a minimum card payment amount, and where you do, they may do the following:

• penalise you; or
• suspend your account.

The above applies, for example, to Visa and Mastercard. However, American Express does not have rules for minimum card payment amounts. Other card reader providers may have similar or varying rules regarding your business introducing mind card payment amounts. 

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Key Takeaways

As a business owner, you will likely use a card payment machine for your business. This is a crucial way to make a sale, particularly as your customers may not always have cash on them. However, when you use a card payment reader for your transactions, there are legal issues you need to be aware of. This article has explained three of these. It points out that card payment providers must abide by laws regulating what they can do, such as contract length. It also explains that you can detail a minimum card payment amount and some rules about this. Lastly, the article explains that surcharging when you have a card payment machine is illegal.

If you need help understanding the legal issues that arise when businesses use card payment machines, contact our experienced business lawyers as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.