NJ Restaurants Are Adding Credit Card Charges To Combat Inflation

NEW JERSEY — Restaurants and retailers are facing skyrocketing food prices as inflation grips the country, with no short-term relief in sight.

As a result, according to Hudson Riehle, senior vice president of research at the National Restaurant Association, a restaurant industry business association, restaurants' total food costs as a percentage of sales are higher than they were prior to the initial COVID-19 outbreak in 2020.

According to the Bureau of Labor Statistics, average wholesale food prices increased 17.5 percent year over year from April 2021 to April 2022, the largest 12-month increase in nearly five decades.

More businesses, including restaurants, are passing on credit card fees to customers in order to combat higher inflation and ongoing supply chain issues. While this is legal, a bill set to be introduced by a legislator on Monday would require consumers to be aware of the charge before making a purchase.

When a business accepts credit and debit cards, it pays a percentage fee to the card processor. These processing fees include an interchange and a brand fee, with the total cost ranging from 2 to 4 percent of each transaction.

The bill would require notification from all merchants, but it specifically mentions restaurants, requiring notification "in the customer entry area or on a printed menu."

The bill's sponsor, Deputy Assembly Speaker Paul Moriarty, D-Gloucester, said, "As the costs of credit card interchange fees are being unfairly passed onto all consumers, even those consumers who do not use credit cards as a method of payment by way of inflated prices for goods and services, it is altogether fitting and proper to establish restrictions which allow for more transparency in the pricing of consumer goods and services and which promote competition with the credit card interchange fee market."

A violation of the proposed bill's provisions is an unlawful practice under the Consumer Fraud Act and can result in a monetary penalty of up to $10,000 for a first offense and up to $20,000 for any subsequent offense.

Furthermore, a violation can result in the Attorney General issuing cease and desist orders, the assessment of punitive damages, and the awarding of treble damages and costs to the injured.

"Credit card processing fees have become increasingly expensive, especially for small businesses who may have tight budgets and not bring in as much revenue as their larger competitors,”said Lisa McKnight, a certified financial planner with Peapack Private Wealth Management in New Providence. “These fees can add up for a business, especially as the U.S. moves more and more to a cashless society.”

According to a report by NJ Money Help, a 2013 class-action lawsuit against Visa and Mastercard resulted in a settlement that allows businesses to pass some fees on to customers in the form of a credit card surcharge.

"There is little competition regarding credit card interchange fee pricing as Visa and MasterCard, the two largest companies in the industry, set the pricing with their member banks and smaller merchants have no negotiating power to change pricing," Moriarty said.

Consumers who believe a company is not abiding by the law can file an online complaint with Consumer Affairs through its website or by calling (800) 242-5846.