Credit cards are incredibly convenient as a payment method. The modern-day merchant simply can’t afford not to accept them at their business. Unfortunately for them though, credit card payments come with a cost.
For perspective, US businesses paid a staggering $100.77 billion in fees for accepting Mastercard and Visa credit cards in 2023. This was, in fact, the first time that swipe fees for these two card networks crossed $100 billion.
Thankfully, implementing a credit card surcharge program can be particularly beneficial for small businesses to offset the cost of accepting credit card payments.
However, before you start surcharging customers, you need to be aware of all the rules surrounding it. Apart from card networks setting their own rules and guidelines, states also have certain rules that merchants must abide by.
In this article, we’ll explore the nitty-gritty of credit card surcharge guidance for merchants across the country.
TL;DR
- A credit card surcharge program can be particularly beneficial for small businesses to offset the cost of accepting credit card payments. However, before implementing it, you must know all the state, federal, and card network rules surrounding it.
- Some nationwide rules that apply to surcharging are: the surcharge rate is capped at 4% (3% for Visa) of the total transaction, businesses mustn’t use surcharging to earn a profit, surcharging doesn’t apply to debit cards, customers need to be informed of the program, and the surcharge has to be listed clearly in the receipt.
- Surcharging is widely accepted in the US except in Maine, Massachusetts, Connecticut, and Puerto Rico. Illinois, Colorado, Georgia, Kansas, Texas, Nevada, New York, South Dakota, New Jersey, Minnesota, California, Florida, Oklahoma, Michigan, and Montana allow surcharging with certain contingencies.
US-Wide Credit Card Surcharge Guidance
Before diving deeper into the surcharge laws of each state, let’s look at some general rules that apply to businesses across the nation on account of their credit card surcharge programs.
- The surcharge rate can never exceed 4% of the total credit card transaction (3% for Visa cards).
- Businesses must follow guidelines set by card networks such as American Express and Mastercard. These networks may have differing guidelines for informing customers about surcharges and surcharge rates.
- Businesses with a credit card surcharge program must inform their customers (both online and in-store) about the program. Before making a payment, customers should know they are liable to pay a surcharge if they choose to pay with their credit cards.
- Surcharges can only be applied to recoup some or all of the costs of allowing credit card purchases. Businesses cannot use surcharging to earn a profit.
- Surcharging does not apply to debit cards even if they are used as credit cards.
- The surcharge has to be a percentage of the total transaction and cannot be an arbitrary amount set by a business.
- The surcharge has to be listed clearly in the receipt so that customers know exactly how much they paid.
States That Prohibit Credit Card Surcharges
You might find this hard to believe but surcharging was illegal in most states till 2013. That same year, merchants won a landmark case against card networks that set the ball rolling for surcharging to be allowed throughout the country.
Today, credit card surcharging is widely accepted in the United States. Consequently, the list of states where businesses can’t implement credit card surcharges is short. As of writing this article, those states and territories are:
- Massachusetts
- Connecticut
- Puerto Rico
Note that surcharging laws change quite frequently so you should stay up-to-date on the latest developments. This is where partnering with a payment processing provider like CardX by Stax can be especially useful. Its surcharging solutions are fully compliant with all applicable rules and have you covered automatically.
States That Allow Surcharging with Certain Contingencies
There are a few states in the US that have unique surcharging laws.
- Illinois – Surcharge rates are capped at 1% or the total processing fee—whichever is lower.
- Colorado – The maximum surcharge that a merchant can charge here is 2% of the transaction amount.
- Georgia – Convenience or swipe fees are allowed in this state but businesses must provide customers with alternate payment options.
- Kansas – The Federal Court recently overturned anti-surcharging laws existing in the state for decades. If a merchant is to implement a credit card surcharge program, they must incorporate credit card fees into the listed price of products.
- Texas – Surcharging, per se, isn’t allowed in Texas but businesses can charge service fees, convenience fees, and offer cash discounts.
- Nevada, New York, South Dakota, New Jersey – In these four states, the surcharge rate cannot be more than what businesses are paying out in processing fees to accept credit card payments.
- Minnesota – Businesses are advised to keep an eye out for new changes in surcharging laws in this state effective from Jan. 1, 2025. As of now, credit card surcharging is legal here but certain surcharges could be banned in the near future.
- California – A bill recently signed by Governor Gavin Newsom has once again prohibited surcharging in this state. The law became effective on July 1, 2024. Businesses must now include credit card fees in the listed price of products. Non-compliance can result in a $1000 fine.
- Florida – Merchants in Florida are in a unique situation because while state law bans surcharging, it isn’t enforceable. Federal courts have deemed this ban to be unconstitutional. To impose surcharges, businesses must follow these rules:
- Customers should be informed of the surcharge program.
- The surcharge should be listed as a separate line item in receipts.
- The surcharge rate cannot exceed credit card processing fees.
- Debit card transactions are exempt from surcharging.
- Surcharges must be registered by the business.
- Oklahoma – The situation in Oklahoma is similar to that of Florida. The law prohibits surcharging customers who pay by credit cards. However, Federal courts have declared this to be unconstitutional. Hence, merchants in Oklahoma can set up surcharging programs as long as they follow card networks and country-wide rules.
- Michigan – Credit card surcharging is legal here but there are strict rules regarding informing customers. Brick-and-mortar stores have to install signage at every point of sale (POS) and entrances that explain surcharge fees to customers. In the case of gas stations, if prices differ for cash versus card payments, they must use similar signs to post both these prices.
- Montana – The surcharge rate is capped at 3%.
States That Fully Permit Credit Card Surcharging
In the remaining states, surcharging is legal as long as businesses follow rules set by every credit card company. As such, the surcharge rate cannot exceed 4%, customers must be informed of a business’s surcharge policy, and the surcharge cannot be more than processing fees.
| Alabama | Iowa | New Mexico | Tennessee |
| Alaska | Kentucky | North Carolina | Utah |
| Arizona | Louisiana | North Dakota | Vermont |
| Arkansas | Maryland | Ohio | Virginia |
| Delaware | Mississippi | Oregon | Washington |
| Hawaii | Missouri | Pennsylvania | West Virginia |
| Idaho | Nebraska | Rhode Island | Wisconsin |
| Indiana | New Hampshire | South Carolina | Wyoming |
Final Words
Credit card surcharging is an effective way for businesses to lower the cost of allowing customers to pay with their credit cards. However, the laws related to surcharging change frequently so partnering with a payment processor like CardX by Stax can help you remain compliant. To learn more, contact us today.
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