The Complete Guide To Credit Card Surcharging: Guidelines For Visa, Mastercard, American Express, & More
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It’s safe to say that merchant relations with credit card processing companies, card associations, and banks aren’t always friendly. Nor would you expect them to be, especially when merchants find themselves subject to all sorts of fees and limitations imposed by these organizations. Every so often, things reach a peak — for example, the massive class-action lawsuit that merchants filed against Visa and Mastercard. Merchants alleged that they were being charged excessively high fees and that Visa and Mastercard’s surcharge rules kept them from adding a credit card surcharge or pointing customers at less expensive options.
After a decade of fighting in court, the merchants involved in the suit, along with the card networks, reached an expensive settlement — and more importantly, the lawsuit laid the groundwork for merchants to recoup some of the costs associated with credit card transactions. The card associations have changed their rules as a result of the lawsuit.
However, despite the lawsuit and the revised rules from the card networks, it’s far from simple for merchants to begin charging their customers for the cost of processing credit card transactions. In this guide, we’ll take a look at state laws and card association guidelines for surcharging, what you need to do if you want to start adding surcharges, and the limits on which cards you can apply surcharges to, how much you can charge, and how the practice could change in the future.
A Discount Is Not a Surcharge
Note that while there are somewhat complicated regulations about surcharging, a common loophole to offset processing costs is something called “cash discounting.” This refers to a processing system designed to have the credit card rate be the baseline; a discount is offered for cash and debit customers. This is technically not a surcharge. Our favorite payment processor that sets up cash discounting (aka “Zero Fee”) credit card acceptance is National Processing.
Table of Contents
What Is A Credit Card Surcharge?
Surcharging is the practice of adding on a small fee to a credit card transaction to cover the merchant’s costs for processing the payment. Instead of the merchant having to absorb this expense, the customer who chooses to pay by credit card pays for the processing costs that do not apply to other payment methods.
Surcharging is sometimes also known as “zero-fee” or even “free” credit card processing. You might have also heard of cash discounting, which is when the customer receives a discount equivalent to the cost of credit card processing if he or she pays in cash (or by paper check or debit card).
While both of these methods serve to pass the cost of credit card processing onto the consumer, the only apparent difference between the two is that with surcharging, the extra cost is added to the advertised price. With cash discounting, the cost is deducted from the advertised price when a credit card is not used. For merchants, the most important distinction between these two methods is that cash discounting is legal everywhere in the US, whereas surcharging credit cards is still prohibited in a few states and territories.
Get To Know Credit Card Surcharge Laws
Before we discuss the various credit card association guidelines for surcharges, let’s address the question of is it illegal to charge a fee for using a credit card or not. You will need to check the laws for the state(s) your business operates in. Over the past several years, the number of jurisdictions that prohibit credit card surcharging has diminished as legal challenges have resulted in many laws banning the practice being overturned by the courts.
States That Don’t Allow Credit Card Surcharges
In the following states, anti-surcharging laws remain on the books but are unenforceable due to recent court decisions:
- California
- Florida
- Maine
- New York
- Oklahoma
- Texas
- Utah
As of early 2021, there is only one US territory and four states that don’t allow credit card surcharges. In the following jurisdictions, you won’t be able to impose surcharges (at least for now):
- Puerto Rico
- Colorado
- Connecticut
- Kansas
- Massachusetts
If your business operates in one of the jurisdictions listed above, imposing a credit card surcharge is illegal. However, you can still offer a discount for customers who want to pay by cash or check instead. Some people argue that this “cash discounting” is a matter of semantics, but we’ll come back to that particular point later. For now, the takeaway is that you can incentivize cash-paying customers with a discount, as opposed to discouraging card payments by adding a fee.
There’s one other limitation you need to consider, as well: You cannot impose a prepaid card or debit card surcharge; you can only do so on credit cards. Even transactions processed using signature debit (often referred to as “running a card as credit”) are still debit and are therefore exempt from surcharging. That’s because of the restrictions implemented by the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act. The Durbin Amendment specifically deals with debit transactions, including the implementation of a cap on interchange fees. (Worth noting: You won’t see those savings if your processor doesn’t support PIN debit or if you are on a tiered or flat-rate pricing plan.)
Two states require additional disclosures to surcharge credit card processing fees: Maine and New York. In both cases, you must post both the cost of paying with cash and the cost of paying with a card using dollars and cents. This is on top of Visa, Mastercard, American Express, and Discover requirements, which require you to post notifications at the point of sale and specify the amount of the surcharge.
It’s also important to note that the limitations on surcharging generally only apply to consumer businesses. Separate laws and regulations affect the ability of government agencies and educational institutions to implement surcharges, and these are allowed even in states that prohibit surcharging by consumer businesses.
So how does all of this affect large businesses that have multiple locations? If your business operates in multiple states, you can still add a surcharge in states that allow the practice — just not in the ones with bans. You’ll want to verify that you’re compliant with each state’s credit card surcharge laws as well.
Credit Card Surcharge Rules: Visa, Mastercard, American Express, & Discover
Once you’ve made sure that it’s legal for you to impose a surcharge in a given state, there’s still a bit of legwork and research to be done.
First of all, you need to look at which cards your business accepts because that will affect your policies. Do you accept Visa and Mastercard? American Express? What about Discover? Each of these card brands has set its own guidelines for merchants wanting to add surcharges for credit cards — which means you should meet all of the applicable requirements before you get started.
You’ll find out that the card associations are very firm on making sure that you, the merchant, do nothing to discourage customers from paying with their particular card brand over other brands. (Note that this doesn’t apply to discouraging card use over other payment methods, such as cash, paper check, echeck/ACH, or debit card.) Fortunately, the overall guidelines for the networks are mostly the same:
- You must notify the card association and your merchant services provider of your intent, in writing, at least 30 days in advance. (Note: American Express surcharge rules do not require you to provide notice so long as you comply with all other rules.)
- Surcharge amounts are limited to your effective rate for credit card transactions, capped at 4%. In other words, you can’t profit from surcharges; you can only recoup your baseline costs.
- You must post appropriate notice inside your store, both at the entrance and at the point of sale. Similar rules apply to eCommerce businesses at the checkout page of their websites.
- You need to include the surcharge amount on the receipt as a separate line item. The surcharge also needs to be included in the network authorization request and settlement. (Note: American Express is the only brand with an exception to this rule.)
- For Visa and Mastercard, you can choose to apply brand-level surcharges (e.g., all Visa cards) or product-level surcharges (only certain lines of cards). However, you cannot do both.
Once you’ve read and understood the core credit card surcharge rules, there’s still more work to do. You need to notify your merchant acquirer and the relevant card networks that you intend to start imposing a surcharge. Finally, you need to ensure that your payment gateway or processing equipment, as appropriate, is reprogrammed to accurately record the surcharges in accordance with the card network requirements.
Best Practices For Surcharge Processing
Now that we’ve covered the core rules, let’s take a closer look at some of the common questions that come up with surcharge processing, from how much you can actually charge to who you need to contact.
Notify The Acquirer & Card Networks
The best way to notify your processor of your intent to start surcharging is to reach out to the account representative for your merchant account and ask how they want to proceed. You have to provide written notice, so a phone call isn’t sufficient. But your account representative (or anyone working in the customer service department if you don’t have a dedicated representative) should be able to tell you to whom you should direct that request.
Give Appropriate Notice To Consumers
If you plan to add surcharges, you need to post a notice at the entry to your store letting customers know that you add a surcharge to all credit transactions. You must also post a notice at your point of sale (your register). The notice must include the rate you charge and a comment that it doesn’t exceed your own processing fees.
Visa’s website has a resource page for merchants who plan to surcharge their credit card transactions. That includes downloadable sample signage that business owners can post in both places. However, the sample signage is specific to Visa surcharges and doesn’t mention any other card brands. Still, you can use the wording to create your signage.
Note: The requirements for surcharging eCommerce transactions are very similar. While you can’t post a notice at your store entrance, you must include the disclosure in the checkout process, and the surcharge must be featured on the receipt.
Correctly Document Surcharges On Credit Card Transactions
If you plan to implement surcharges, keep in mind that Visa, Mastercard, and Discover require your point of sale system to include the surcharge as a line item (although there are no rules as to the invoice wording for adding a credit card fee). You must also report all surcharges back to your processor and the credit card networks. So before you decide to implement a surcharge, you should check that your existing processing setup supports it. Whether you sell online or in person, your surcharge needs to be included on the receipt as well.
Square does allow for the practice of surcharging, provided that you follow the guidelines outlined above. However, because of the way Square’s system is set up, it deducts the processing fee from the total transaction (after tax, tip, and yes, the surcharge). That ultimately means you won’t be able to perfectly offset your Square fees with a surcharge. There will always be a slight difference that can’t be reconciled. Square specifically says in its help center page on surcharges that some merchants use a third-party calculator app to help them figure out the math.
Common Questions About Credit Card Surcharges
Should You Add A Credit Card Surcharge Policy?
Credit card surcharging has rapidly gained in popularity in recent years as court decisions, and legislative changes have gradually removed legal barriers to the practice. The ongoing COVID-19 pandemic has greatly accelerated this trend. Merchants struggling to stay afloat have increasingly turned to credit card surcharging as a way to lower operating expenses and keep their businesses profitable. All but a few states now allow the practice, making it a viable option for most small business owners in the US. Nonetheless, the question remains: Should you add a surcharge?
The answer to this question will depend on both your customers and what your competitors are doing. Implementing a surcharge could potentially cost you some customers. This is especially true for eCommerce merchants or anyone competing directly with big box stores — if you sell the same kind of products readily available on marketplaces such as Amazon and eBay or from Walmart or Target, adding an extra charge might send customers in search of a better deal.
That said, if your product is unique, you have a strong customer following, or you have some sort of other unique value proposition, you’re less likely to feel the pressure to conform to the same practices. Some businesses do have success with the zero-fee processing model. You just need to find a good, reputable company that can help you implement the necessary technology, either in your store or on your website.
And here’s one final thought to consider: If your merchant fees are getting to be prohibitively high, it might be time to look for a new processor instead of resorting to implementing a surcharge. If you’re on a tiered or flat-rate pricing plan, we encourage you to look for an interchange-plus option, which is more affordable and transparent. (Note that flat-rate pricing is actually the best option for very small or seasonal businesses due to the lack of additional account fees.) Check out our top-rated merchant account providers to get started, or look at our article, Six Signs Your Small Business Needs To Switch Payment Processors, to confirm what you already suspect.
Have more questions about surcharging? Leave us a comment, and we’ll do our best to help you get the answers you need!
In Case You Missed It...
Note that while there are somewhat complicated regulations about surcharging, a common loophole to offset processing costs is something called “cash discounting.” This refers to a processing system designed to have the credit card rate be the baseline and offers a discount for cash and debit customers. This is technically not a surcharge. Our favorite payment processor that sets up cash discounting (aka “Zero Fee”) credit card acceptance is National Processing.
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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- Should You Implement A COVID Surcharge? 4 Ways To Manage Your Profitability During The Pandemic - June 2, 2020
The quick stop store, charges a debt fee of $0.35 cents, plus a charge $1.00 for cash back. They scan a lotto ticket for a dollar , to cover the $1.00 fee. Is this legal?
Hi Thomasa,
I don’t think we can give a definitive answer to your question, as every state that has its own lottery has its own rules governing them. It might be legal in one state, but not another. It does sound kind of fishy, though, since it’s unlikely that a merchant can legally force a customer to buy a lottery ticket.
Regarding the State of Maine, if I understand correctly there is a law on the books that prohibits surcharges. However, similar to New York, if disclosure is made to the cardholder about the costs in dollars and cents of the surcharge, then the law is unenforceable. Is that correct? Is there a ruling or documentation to support this? just want to make sure we have support for whatever decision we make.
Hi Marty,
Maine Rev.Stat §8-509 expressly prohibits merchants from surcharging. The statute does, however, allow government entities to surcharge. It was also amended in 2017 to expressly allow cash discounting. Many sources we found all seem to agree that this statute was recently overturned by a court decision, and surcharging is now effectively legal in Maine. This appears to be a very recent decision (probably within the last year), and the Maine legislature hasn’t amended the statute to reflect this decision yet. Our recommendation would be to implement a cash discounting program instead, which the statute allows. Customers are far understandably more supportive of getting cash back at checkout than they are about having to pay an extra fee.
In reference to this area: For Visa and Mastercard, you can choose to apply brand-level surcharges (e.g., all Visa cards) or product-level surcharges (only certain lines of cards). However, you cannot do both.
Does “product-levels” refer to reward cards? I was confused by this.
What is the best way for a merchant to recoup costs for the majority of transactions coming from debit cards if we cannot add a surcharge, do discounts for paying in cash?
What is the best way for a merchant to identify if a debit card is coming through? Will the processor able to identify that and add a $0.00 processing fee? I can’t seem to find this info as I was reading your document.
This information was very clearly outlined and very helpful! Thanks for pulling it together for us.
Hi Sam,
Surcharging is never allowed on debit card purchases, even when the card is run as a credit card purchase. If you have your merchant services provider set you up with either surcharging or cash discounting, they’ll modify the software on your processing hardware to automatically identify the type of card being used and apply the surcharge/discount, as appropriate. The same goes for your payment gateway for eCommerce sales.
Do you have any resources I can see, regarding the claim that Maine’s surcharging law being unenforceable due to recent court decisions? All I can find is the current anti-surcharging law on the State of Maine site, and a bill that was introduced to overturn that but it failed (in 2017/2018). Any info would be great. Thanks!
Hi Emily,
Maine Rev.Stat §8-509 expressly prohibits merchants from surcharging. The statute does, however, allow government entities to surcharge. It was also amended in 2017 to expressly allow cash discounting. Many sources we found all seem to agree that this statute was recently overturned by a court decision, and surcharging is now effectively legal in Maine. This appears to be a very recent decision (probably within the last year), and the Maine legislature hasn’t amended the statute to reflect this decision yet.
I’d it legal in Vermont to apply a”non cash adjustment” to bank debit cards even if the function as credit cards as well?
Hi Kasealee,
Cash discounting and surcharging are both legal in Vermont, but can only be applied to credit cards. Neither are allowed for debit cards, even when the card is being run as a credit card.
So does every business that wants to start surcharging need to submit the “Merchant Surcharge Form” to Visa and MasterCard if we intend to surcharge those credit cards?
We are a manufacturer/resale company and wondered if this is only a requirement for the credit card processing companies.
This comment refers to an earlier version of this post and may be outdated.
Hi Emma,
If a business wants to impose a surcharge on credit card transactions, it needs to notify the card brands just once before it implements the policy. After that, no further notice to the brands is required. But you will need to make sure your credit card processing company sets you up to correctly document the surcharge as a line item on the receipt.
This comment refers to an earlier version of this post and may be outdated.
Do the rules regarding surcharges and convenience fees differ depending on whether the card holder purchasing the product or service is a consumer as opposed to a business?
This comment refers to an earlier version of this post and may be outdated.
Hi David,
There’s nothing to stop you from applying a surcharge to B2B transactions, but if the cost of the transaction is a concern, consider switching to a low-cost ACH option or see if your provider is giving you the absolute lowest interchange rates you qualify for. With regard to consumer transactions — you can look at alternative payments, a better provider, or consider switching to a cash discount or zero-fee processing setup if you’re concerned about cost. Just be aware that you do have to post a notice, and your customers may (or may not) be receptive–you’ll know better than anyone how they’ll respond.
This comment refers to an earlier version of this post and may be outdated.
I work for a Wholesale Distributor in NYS. We have a wide variety of customers. Are we allowed to charge some customers a cc surcharge and not charge others?
This comment refers to an earlier version of this post and may be outdated.
Hi Ray,
Generally, if a surcharge is going to be implemented, it must be applied equally. The card associations will not be too happy if they see you are charging some customers and not others.
This comment refers to an earlier version of this post and may be outdated.
From what I read, it looks to me that a merchant can not impose a “square fee” when using a debit card for payment. Is this correct? I ask because I have a merchant who charged me for a “square fee” on a debit card payment.
This comment refers to an earlier version of this post and may be outdated.
Hi Melissa,
You are correct. Merchants can’t charge a surcharge on any debit card, even if it’s backed by credit and has a Visa/MasterCard logo. However, not everyone is aware of this fact, especially because Square doesn’t have a debit processing option. All those debit cards are processed as credit. So, the merchant likely is unaware of this and is not doing it with malicious intent.
This comment refers to an earlier version of this post and may be outdated.
Are these “transaction fees” or “surcharges” taxable? Where are the line items supposed to be placed on the receipts? Do they go under the subtotal and above tax, or do they go below tax and get assessed after taxes?
This comment refers to an earlier version of this post and may be outdated.
Hi Chris,
Your questions would be best answered by your processor so they can help you implement a system for surcharging.
This comment refers to an earlier version of this post and may be outdated.
Hello,
Is Florida a state where it’s prohibited to charge a credit card fee?
Thank you for your help.
Tammy
This comment refers to an earlier version of this post and may be outdated.
Hi Tammy,
Here’s an excerpt from the post that should answer your question:
This comment refers to an earlier version of this post and may be outdated.
When we talk about “If your business operates in one of these states, it’s illegal to impose a surcharge” is it the state where I am shipping the product or the state where I am going to send a bill or my warehouse state or my back office state. These are all 4 different states
By the way was paying for my speeding ticket at the court and they charged a credit card fee the other day. I live in Texas. So is it legal or illegal?
This comment refers to an earlier version of this post and may be outdated.
Hi Olga,
Operating out of multiple states makes it complicated. We would suggest contacting a lawyer or accountant or even the state to clarify.
As for the second question — what you paid was likely a convenience fee, not a surcharge. Those are governed by entirely different rules and laws.
This comment refers to an earlier version of this post and may be outdated.
Very nice article. I used to be up on this, but lost track over the years.
A restaurant near me started imposing the surcharge at 4%, which is the maximum. How do I know that’s really their costs and not just taking as much as they can? If it were 3.6% I wouldn’t give it a second thought, but the max makes me leery.
This comment refers to an earlier version of this post and may be outdated.
Hi Ken,
No need to be leery! Some restaurants could easily have that 4% effective rate depending on the type of cards they process and their provider.
This comment refers to an earlier version of this post and may be outdated.
Can you please clarify the laws in NY State now that it is legal to surcharge here? There is some confusion on whether or not the signage needs to be different from state to state and if there are any additional policies in place for New York. Thank you!
This comment refers to an earlier version of this post and may be outdated.
Hi Amy,
Here is an excerpt from this post that should answer your question:
This comment refers to an earlier version of this post and may be outdated.
We are looking to implement surcharging. How do we determine the rate allowed to charge. Since our transactions have so many different program pricing’s is it simply the lowest interchange rate charged by any of the companies?(ours range from 2.95% to 2.1%) Can we average in Card brand fees and dues and our Gateway/Other Fees? Our overall effective rate we’re charged is 3.32%. I’m inclined to believe that to be safe w cant charge higher than 2%, but I have seen our suppliers charging rates as high as 5% which I can’t believe is in line with their agreements from what your article has said.
This comment refers to an earlier version of this post and may be outdated.
Hi, Matt!
Thanks for reading and for your question. Here’s what Melissa explains in her post, and hopefully this clears it up for you:
Does that answer your question? Hope this helps.
This comment refers to an earlier version of this post and may be outdated.
Can you charge a surcharge fee on freight and sales tax? In other words the total amount of the bill or is it just the “product” being purchased. Our business is in Wisconsin.
Thank you!
Tracy M Nolan
This comment refers to an earlier version of this post and may be outdated.
Hi, Tracy!
Thanks for your question. Credit card processing fees are taken out before anything else — so surcharging can be used to cover the portion of sales tax and shipping that get eaten by processing fees, as well as the actual purchase. Just bear in mind that you’re limited to a max 4% surcharge. I hope that clears things up for you.
This comment refers to an earlier version of this post and may be outdated.
Hello would like to know if in New Jersey is ban to charge a surcharge on the total amount of the service.
Thank you!
This comment refers to an earlier version of this post and may be outdated.
Hi Stefany,
New Jersey does not ban the practice of adding a surcharge. Hope this helps!
This comment refers to an earlier version of this post and may be outdated.
Hello Lisa,
Do you have a list of companies that provide zero fee credit card processing (surcharging) services, similar to CardX?
Thanks!
This comment refers to an earlier version of this post and may be outdated.
Hi Francis,
We do have an article on this topic, though no list at this time. Best of luck!
This comment refers to an earlier version of this post and may be outdated.
Hi Melissa,
I a an ISO direct with FD. You should know that in performing the compliance process which can take months. They will not allow you to take any Debit Cards (Pin or Otherwise) and they say you must turn off Amex because fo the playing field not being level. I am not sure how other processors handle the compliance process piece. But the whole process has become so discouraging most of my merchants attempting to doit just give up. This is all due to the fact that they are giving up the possibility of more revenue that outweighs the discount.
This comment refers to an earlier version of this post and may be outdated.
Melissa,
1. Can I charge a 4% surcharge regardless if it is a swipe or keyed credit card transaction?
2. How do I determine if they are using a credit card or debit card?
Brian
This comment refers to an earlier version of this post and may be outdated.
Hi Brian,
Thanks for your questions! To answer your first question, Visa allows surcharging at the brand level (all visa products) or at a product level (a surcharge for, say, business rewards cards). The actual surcharge amount needs to be posted at the point of sale. So transaction type (swiped or keyed) would not factor in here.
Second, as for debit or credit cards, this is exactly what Visa rules say:
“Merchants with Acceptance Devices that offer Cardholder choice for debit Transactions in the form of “credit” and “debit” buttons must ensure that:
– Visa debit Card Transactions are not assessed a US Credit Card Surcharge
– It is made clear to the Cardholder that surcharges are not permitted on debit Transactions regardless whether a Cardholder selects the “credit” or “debit” button”
So from that, it’s clear that if the card says “debit” on it, you can’t charge a credit card surcharge even if the customer processes it at a credit card rather than entering a PIN. The Surcharge rules start on page 378. I hope that helps!
This comment refers to an earlier version of this post and may be outdated.
I work for Broker of credit cards. If we have information on an ISO signing up businesses with no 30 day notice to card brands and charge 4% on all cards including debit cards, how do we submit the information to Visa/MC?
This comment refers to an earlier version of this post and may be outdated.
Hi Linda,
Our understanding is that you can report it via the Visa and Mastercard websites, or you can even call Visa directly or send a written report. Alternatively you might be able to report them to consumer financial protection bureau.
This comment refers to an earlier version of this post and may be outdated.
Several of our vendors in Florida and Texas who accept credit cards charge us a percentage of the total as a surcharge if we pay by card instead of a check or other method. Are they allowed to do this? I haven’t been able to figure out of the ban in these states is valid or not, so have been hesitant to call the vendors our on this.
Thanks.
This comment refers to an earlier version of this post and may be outdated.
Hi Michielle!
According to Visa:
“Q. Is a merchant allowed to add a surcharge to the purchase amount for using a Visa card?
A. In general, no. Surcharging is currently permitted in Australia, Mexico, and New Zealand, and on certain credit card transactions in the U.S.
Surcharging isn’t allowed everywhere in the U.S. Currently, there are laws limiting surcharging in Colorado, Connecticut, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. California’s and New York’s laws limiting surcharging have been enjoined from enforcement pursuant to court orders, but appeals are pending. An order upholding Florida’s law limiting surcharging was reversed on appeal, but remains subject to further litigation. Consumers who are subjected to a surcharge in states where they may be prohibited from surcharging may want to report the retailer to their state attorney general’s office.”
I hope that answers your question. Best!
This comment refers to an earlier version of this post and may be outdated.
With the regulation that surcharges cannot exceed 4%, how are local government agencies getting away with charging flat fee ‘surcharges’, eg. $10 for all police citations? In come cases that may be less than 4%, but significantly more in others. Aren’t they held to the same standards?
This comment refers to an earlier version of this post and may be outdated.
Hi Adam,
They’re likely passing them off as convenience fees, which have different regulations. You can read about this here.
This comment refers to an earlier version of this post and may be outdated.
We have a local restaurant that is charging a flat 69 cent surcharge on credit cards and debit cards. This fee is charged irregardless of the total amount charged. This can equate to a 8-10% fee on a small meal. Is this allowed or legal?
This comment refers to an earlier version of this post and may be outdated.
Hi Steve,
Without knowing where you are located, it is really hard to say. Generally, surcharges are supposed to be capped at 4%, however, if they’re passing it as a convenience fee, it might technically be acceptable, but I believe they should be capped at the processing amount.
This comment refers to an earlier version of this post and may be outdated.
Has anything come of the New York case? Are all states allowed to now process surcharges? We recently started a surcharge program at our restaurant. It has been testing… Not all people are generally excepting whether they are told before purchase or not.
This comment refers to an earlier version of this post and may be outdated.
Hi Justin,
There is a recent post in the Lexology library titled: NY’s Highest Court Will Consider Credit Card Surcharge Ban. That may have the info you are looking for. Hope that helps!
This comment refers to an earlier version of this post and may be outdated.
Hi,
Great article, thank you. I have a real life example for you. I live in Kansas in an apartment complex. Until very recently, the management were charging fees to pay rent using credit card. They now have stopped us from paying by credit card claiming that a “new” law was passed in Kansas prohibiting them from charging fees for credit card use. I looked into this and it appears this law is not “new” at all, it has been here for many years. Does this mean my apartment community has been breaking the law for a long time and have potentially stolen thousands of dollars from renters like me? If yes, what do they risk and what can we do to rectify the wrong that was done?
Thank you,
Stephane
This comment refers to an earlier version of this post and may be outdated.
Hi, Stephan!
There’s a lot of details I’m missing, so unfortunately I can’t give you a solid answer. It certainly sounds like your apartment complex might have gotten called out for some dodgy behavior. However, keep in mind it may not actually be your apartment complex doing the payment processing. They might have a white-label setup powered by someone who handles the transactions anonymously. And they might have switched processors, or gotten new (smarter) management, which could contribute to the change in policy. I certainly think it’s possible that your complex management could and would lie about the reasoning to mitigate any sort of negative fallout with residents.
The problem is that while surcharges are banned, convenience fees aren’t. As a fellow Kansas resident, I have paid a LOT of convenience fees for online payments (especially for utility bills). My apartment complex charges a convenience fee for credit transactions and uses a separate processor to accept e-checks.
I can’t find specifics on what to do in Kansas if you suspect that you’re paying an illegal surcharge but I do know that generally speaking if a company gets caught violating card association rules or local laws, they could potentially have their merchant account terminated, making them unable to accept cards unless they can find another processor willing to take them on. (Effectively, that means you’d have to drop a check off in person every month instead of paying online.) If you’re genuinely really concerned, talk to a local consumer advocacy group or the state’s attorney general, and see if there’s anything that can be done. But otherwise, as a fellow consumer, I advise always paying with ACH/bank accounts where you can!
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I work at a preschool. We are supposed to begin adding a surcharge to credit card users at the school. We will be using a credit card processing company called CardX. Are they responsible for notifying the credit card company of our intention? Has anyone used them? This seems to be more complicated than they made it sound over the phone.
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Hi Terry,
Unfortunately, we have not reviewed CardX Processing, so we can’t confidently give an assessment one way or the other, that being said, I suggest contacting them directly. Best of luck to you!
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My company accepts all credit cards (VISA, MasterCard, Discovery and, American Express). We use PayPal as our credit card processor. We would like to add a handling fee to help offset some of the expense of the PayPal fees. We are located in South Carolina, Mississippi, Pennsylvania, and Oklahoma and sell in various other states. Would this be appropriate?
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Hi Phil,
Per their user agreement, it appears that it would not be appropriate.
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Hey Phil,
I work with a company that has a program that allows you to share or pass on all of the card fees to your customers. Card Payment Solutions is based in Florence, SC and we would be more than happy to explain how this can benefit your company. You can contact someone through the website, or you can also contact me at chad.cpsolutions@gmail.com or by phone at (864)293-9733. I’m not sure what part of SC you have locations, but I am based out of Greenville and would be happy to meet with someone if they are in the upstate. Hope this helps!
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I wondered it a surcharge can be levied for certain types of transactions but not others. In other words, if you charge a surcharge for one thing to you have to charge it for everything?
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Hi, Patty!
You can’t pick and choose which products or types of transactions to add a surcharge for, unfortunately. What you can choose is whether to surcharge at the brand level (all Visa transactions, which means all MasterCard and all Discover cards, and therefore all American Express cards), or at a card level — only particular kinds of cards (namely those with higher fees). However, surcharging at the card level seems a bit complicated to me because all of the networks’ surcharging rules are linked. Visa and MasterCard’s are identical, for example. American Express basically says you can’t add a surcharge ONLY for Amex cards (Which would discourage customers from using those cards).
I recommend checking out Visa’s Q&A on surcharging. It’s helpful, though it’s by no means comprehensive.
https://usa.visa.com/dam/VCOM/download/merchants/surcharging-faq-by-merchants.pdf
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“If your business operates in multiple states, you can still add a surcharge in states that allow the practice — just not in the ones with bans.”
Is there case law or some other authority to support the above?
Thanks.
-M
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Hi, Mira!
The best source is actually the card networks, since they set the guidelines.
From Visa’s Surgcharging Q&A for Merchants:
“Q. I operate stores in multiple states. I understand that state laws prohibit me from
surcharging in some states where I operate, but not others – does that mean I can’t
surcharge in any of the states where I operate?
No. If a merchant is prohibited from surcharging in one state, Visa’s rules do not prevent the
merchant from surcharging in other states that allow the practice. ”
https://usa.visa.com/dam/VCOM/download/merchants/surcharging-faq-by-merchants.pdf
Hope this helps!
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Tovi,
I wouldn’t think that surcharging a donation is a good idea. The benefactor is already giving probably at the level they are comfortable with. I would think that surcharging would hurt donations more than the offset of fees.
I personally know people that will leave a smaller tip when they are surcharged because they feel like the surcharge is already on top of the price, just like a tip.
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I have a Visa debit card. The merchant charges a surcharge on my card saying they record it as a credit not a debit. They say they don’t accept debit payments. Is this legal?
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Phil,
Unfortunately, we don’t know the answer to this question. If you happen to figure it out, please let us know as it will help our other readers.
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HI Phil,
This is not legal for the merchant to do on the surcharge program. It would put them in violation of the surcharge rules. The person who is really at fault is the credit card processing company. In order for the debit to be recorded as debit and not credit, the processing company would have to enable that function on the terminal.
Feel free to reach out to me with any questions.
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Hello,
What are your findings on Non-Profit organizations charging a Surcharge for donations?
Thanks!
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Tovi, we’ve never heard of such a thing, but if you can find us some examples, we’d love to see them.
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Does the Colorado ban impact both the buyer and the seller? If my business is HQ in a state permitted to surcharge, can I put a surcharge on an e-commerce sale being shipped to a customer in Colorado?
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Hi, Lisa!
Surcharging is allowed on CNP (eCommerce transactions), provided you follow all of the other requirements. However, commerce in general is governed by individual states, so the laws and requirements vary. I can’t find any specifics about surcharging across borders as you’ve indicated. I recommend talking with an accountant or lawyer to make sure you are absolutely clear on what you can and cannot do.
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