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The Complete Guide To Credit Card Surcharging: Guidelines For Visa, Mastercard, American Express, & More

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Frank Kehl

Frank Kehl

Frank Kehl has been writing about merchant services, payment gateways, and international money transfer services since 2015. He has a Bachelor of Science degree from Penn State and a Juris Doctorate from the Ventura College of Law. After a long and enjoyable career of traveling around the world as an Air Force navigator, he’s comfortably settled down in the wine country town of Paso Robles in California’s scenic Central Coast region. He enjoys reading, photography, hiking, and numerous other outdoor pursuits.

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Responses are not provided or commissioned by the vendor or bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by the vendor or bank advertiser. It is not the vendor or bank advertiser's responsibility to ensure all posts and/or questions are answered.

    Tara

    I’m in NY, and was charged a 3.95% surcharge when I used my Apple Cash thru Apple Pay at the local pizzeria. When I questioned it, they told me any type of charged payment was subject to the fee. Apple Cash is the same as using plain cash to pay for services. When I pointed out their tiny sign on the counter about debit cards not being charged and how Apple Cash is the same as using a debit card, the person told me it didn’t matter, and because it was a charge, the surcharge applied. Is this legal and how can I report them? Thanks

      Jessica Dinsmore

      Hi Tara,

      Based on the business’ own posted notices, it seems like you should not have been charged a surcharge. This is likely a combination of inadequate employee training and using terminals that weren’t correctly programmed to only apply the surcharge to credit card purchases. Since Apple Cash isn’t tied to any of the major credit card brands, you should probably contact Apple Cash Customer Support: https://support.apple.com/apple-cash

        Jess

        Would a Visa Commercial Card be considered a credit card or a prepaid card since the funds are effectively not there until they are “released” by someone in Accounts Payable after an invoice has been approved?

        In the past few years I have been inundated with requests for payables automation programs. At first I was participating in all of them but data that had to be manually stored and, subsequently, entered forced me to create a new full time position who’s primary role is retrieving payment notification emails and processing virtual card payments (many using single use cards). Am I able to add a surcharge to just Virtual cards or just commercial cards?

        Do you have any articles with more info on the topic of Virtual Card or payables automation programs?

          Jessica Dinsmore

          Hi Jess!

          It appears that corporate/commercial cards can be issued as either regular credit cards or as prepaid cards, where a transaction would be funded directly from a business account. Visa allows surcharging on credit card transactions, but not on prepaid cards (which are essentially the same as debit cards).

          Likewise, surcharging on a virtual card transaction will depend on whether the card tied to the virtual card is credit or debit/prepaid.

          Surcharging is also regulated by state law, but these vary widely and, in many cases, aren’t very specific. Your best bet is to review the surcharging policies of each of the major credit card associations before setting up a surcharging program.

          Lastly, your merchant services provider should be able to set you up with terminal software or a payment gateway API that will automatically apply the correct surcharge.

          Regarding your payables question–This isn’t a topic we’ve covered, but it’s definitely something we will consider covering in the future!

            gio

            ok so as of right now in california, this gas station that charges me 75 cents for using my DEBIT bank card on anything less than 10 dollars is illegal? if thats true i want them to know about it. i need some sort of law code that i can give to them in person or anonymously mail to them so they know they are now being invesigated for illegal activities and being watched. every day i buy a an arizona 99 cent tea and im charged 1.04 plus the 75 cent surcharge for using my debit card. thats illegal? it is in no way a credit card at all, simply my bank debit card.

              Jessica Dinsmore

              Hi Gio,
              It’s pretty routine in California for gas stations to charge a fee for using a debit card, although it’s usually just $0.35 and you have to accept it before they will authorize your card. It’s a convenience fee, though, and not a surcharge, so it’s not actually illegal. Here’s some more information from the AG’s office: https://oag.ca.gov/consumers/general/credit-card-surcharges

                Thomas

                I received an advertisement from a roofing company in my latest Valpak. The individual insert displayed the logos from the major credit card companies. I get an estimate and a couple weeks later I decide to go with this company. We go to sign the contract and I’m told there is a 3% credit card fee. Was the seller required to have had this information in his ad when he offered the service?

                  Jessica Dinsmore

                  Hi Thomas,

                  Every state has its own disclosure laws regarding credit card surcharging, so we can’t give a definite answer. Surcharging has only recently been made legal in many states, so the disclosure laws are probably still being worked out. From what we’ve seen so far, most of the existing laws are focused on traditional storefronts, even though the practice is probably more common in the construction industry. Until their local legislature amends the law to require disclosure on printed advertising, most businesses probably won’t do it voluntarily.

                    Jane Maracek

                    Can a business entity in PA charge 3% on a monthly fee and no charge for cash or check?

                      Jessica Dinsmore

                      Hi Jane,
                      Pennsylvania allows credit card surcharging, and this would include recurring billing subscriptions. However, the following requirements must be met: (a) only credit card transactions can be surcharged (no debit cards or ACH, etc.), (b) the merchant must provide adequate notice to the customer before payment is made, allowing them the option to use a different payment method, and (c) the surcharge cannot exceed the actual cost to process the transaction, up to a maximum of 4%. This only includes actual transaction processing fees, not monthly account fees or other expenses associated with maintaining a merchant account.

                        Heath Stephenson

                        Do the card association rules only extend to your relationship with the card association or are they enforceable by some type of law? If a merchant in Utah charges over a 4% surcharge is there any type of legal risk that accompanies that action or only trouble with the card association?

                          Jessica Dinsmore

                          Hi Heath,

                          Thanks for posting your question here!

                          Utah is one of several states where anti-surcharging statutes are still on the books but are no longer enforceable due to recent court decisions. Therefore, Utah doesn’t have a law limiting a surcharge to 4%, because it still doesn’t have a law allowing the practice in the first place.

                          However, Visa, Mastercard, and the other major credit card brands do have policies limiting a surcharge to no more than the actual cost to process the transaction, up to a maximum of 4%. Merchants have to agree to abide by these policies in order to be able to accept credit cards, and being blocked by Visa or Mastercard for violating them would have a serious impact on their business.

                          If a Utah merchant charged a surcharge higher than 4%, the customer probably wouldn’t have a legal recourse at this time. However, they could report the merchant to the appropriate credit card association, which would be quite likely to terminate the merchant’s ability to accept their card brand in the future.

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