Pursuant to a settlement of the Canada merchant class litigation, Mastercard agreed to modify certain standards and business practices to permit Canadian merchants to apply an extra checkout fee, also known as a surcharge, to cardholders who pay with Mastercard-branded credit cards. The standards permitting such surcharging become effective on October 6, 2022. These fees are not allowed on Debit Mastercard or Mastercard prepaid cards.

A summary of the changes required by the settlement that Mastercard acquirers will provide to their merchants can be accessed here. Please find answers to several frequently asked questions (FAQs) by clicking here.

Below is a summary of key provisions of the no surcharge rule change. Merchants should review the actual change and complete the required notification process before implementing a surcharge on Mastercard credit cards.

Merchant registration with Mastercard

A merchant’s ability to apply a surcharge is conditioned on the merchant’s satisfaction of certain disclosure requirements. These disclosure requirements include advance notice to both Mastercard and the merchant’s acquirer of the merchant’s intention to impose a surcharge no less than thirty (30) days before the merchant implements a surcharge.

The online merchant notification webform launched September 6, 2022. Click here to access.

Types of permissible surcharges

Merchants are permitted to apply either a brand-level surcharge or a product-level surcharge to Mastercard credit cards. A brand-level surcharge is one where the merchant charges the same percentage on all Mastercard credit cards. A product-level surcharge is one where the merchant imposes a surcharge on a particular Mastercard credit product. In both circumstances, the level of the surcharge is subject to a cap.

Cap on the level of the surcharge

The level of the fee that a merchant may charge a cardholder is capped in relation to the merchant’s cost for Mastercard credit acceptance. For merchants who choose to impose a brand-level surcharge, a merchant may only surcharge a Mastercard cardholder at the lesser of the merchant’s average effective merchant discount rate that the merchant pays its acquirer for Mastercard credit acceptance or the Maximum Surcharge Cap, which can be found below. For merchants that impose a product-level surcharge, a merchant may only surcharge a Mastercard cardholder at the lesser of the merchant’s cost to accept the particular Mastercard credit product or the Maximum Surcharge Cap.

Merchant disclosure to consumer

A merchant must provide clear disclosure to the merchant’s customers of the merchant’s surcharging practices at the point of interaction, which shall include the amount of the surcharge and the dollar amount of the surcharge on the transaction receipt provided by the merchant to its customers. Merchants should refer to the specific standards for additional consumer disclosure obligations.

Nothing in the Mastercard standards affects any obligation of a merchant to comply with applicable provincial or federal laws, including but not limited to provincial laws that may prohibit or restrict surcharging of credit transactions, and federal and provincial laws regarding deceptive or misleading disclosures.

Other requirements should the merchant accept competing credit networks

For merchants that accept other brands of credit payment networks, such as American Express or PayPal, there are requirements around the circumstances in which such a merchant could surcharge Mastercard cards that depend on the costs of those brands to the merchant and those brands’ surcharging restrictions. A merchant should refer to the specific rules and/or contact their acquirer for greater detail concerning those requirements.

Relevant data for merchants who surcharge

The Maximum Surcharge Cap: 2.4%