Credit Card Surcharges: What Are They and Are They Legal?

Credit cards are incredibly popular, and it’s easy to see why: they’re convenient and accepted nearly everywhere. According to Forbes, 32% of consumers use it as their primary payment method. 

But as great as they are for consumers, merchants know that accepting credit card payments comes with added costs in the form of processing fees.

And if this processing fee has been eroding your profits, it’s time to consider offsetting it by levying a surcharge on your customers.

A credit card surcharge is an additional fee charged by businesses that receive payment through credit cards. The surcharge is calculated as a percentage of the final purchase amount and varies depending on the merchant, card type, and location.

In this article, we’ll learn about the benefits of credit card surcharging and also delve into the legalities and guidelines for levying a surcharge.


  • A credit card surcharge is an additional fee charged by businesses that receive payment through credit cards. The surcharge fee is paid by the customer and helps offset the processing cost for that particular transaction.
  • Credit card surcharging is legal in most U.S. states. It is currently illegal in Connecticut, Massachusetts, and Puerto Rico.
  • Surcharging is governed by certain rules and regulations. Businesses need to be compliant with these laws and also with the guidelines issued by card companies.
Learn More

The Purpose of Credit Card Surcharges 

When a merchant accepts a credit card payment, the credit card company charges a processing or interchange fee. This covers the costs of processing the payment, the risks involved, and also the chance of the payment being a fraud.

The processing fee can be a fixed value or a percentage and varies among card brands. While it’s a small value compared to the total order amount, it can quickly add up and lead to a considerable loss in profit.

To avoid this, businesses can add a surcharge fee for credit card payments. The surcharge fee is paid by the customer and helps offset the processing cost for that particular transaction.

Credit card surcharges help merchants avoid any transaction costs and get nearly 100% of their revenue. But it does have an impact on the customers. 

The impact on pricing transparency

Customers usually want brands to be transparent about their product costs. In fact, 48% of consumers abandon carts due to high extra costs during checkout. 

A credit card surcharge is also one such fee that is added during the final point of sale. Some customers would not want to incur this additional fee, which might increase the cart abandonment rates. 

However, all state laws and credit card networks want merchants to be upfront about the charges on their websites. 

For example, Penfold, a used car business, clearly mentions their surcharge fees on their checkout page.


If the credit card transaction is in person, you must inform the customer about the surcharge before they make the payment. 

This helps maintain good customer relationships while still offsetting the processing fee. It also reduces last-minute cart abandonments as buyers are well-informed beforehand.

It’s also worth noting that when you implement and communicate your surcharging program properly, you’ll find that customers will understand why you’re doing it. 

Case in point: OR Hope, a business that offers regenerative health services, started a surcharging program and initially thought they would lose customers. But as it turns out, their clients appreciated the clarity and honesty regarding the payment process.

“Not a single client has come back to us saying they think our company is wrongheaded for allowing them to pay via credit card while paying the fees,” explains Jeffrey.

“Rather, in moments from opening our invoices, clients become aligned as partners with us toward eliminating usurous credit card fees, and conversations jump to, ‘What about payments via debit cards, ACH, wire transfers, and such?’”

Jeffrey adds, “Of course, when our clients still have reasons to opt for credit cards, CardX by Stax. enables them to do so without needlessly sucking resources from our young, fast growing company.”

Because the OR Hope team was transparent, the company was able to have open discussions with customers and come up with mutually-beneficial solutions. 

Now, if you’re still worried about losing customers, you can offer cash discounts to encourage cash payments instead of credit cards.

Comparing cash discounts with surcharge

Some merchants may charge a reduced price for a product for cash payments as compared to card payments. This is called dual pricing, which is legal in all the U.S. states. 

Such cash discounts provide an alternate and equally lucrative payment method for customers. On the other hand, merchants can utilize this incentive to divert buyers from making credit card payments, reducing the overall processing fees. 

Both cash discounts and credit card surcharges have certain rules in the U.S. For example, a cash discount should always be a reduction in the original price for cash payments. It should, by no means, be an increase in the original price for card payments.

Of course, while cash discounts seem like a great method to avoid surcharges, you’ll still end up losing some revenue due to the discounts.

Moreover, credit cards often provide other benefits like cashback and reward points, which are worth more than the surcharge fee. That’s why many buyers still prefer paying through credit cards despite the additional costs. 

Are Credit Card Surcharges Legal?

Initially, most credit card issuers banned surcharging in order not to discourage customers from using credit cards. In 2005, a group of U.S.-based merchants filed a case against major card companies like Visa and MasterCard, claiming conspiracy to fix the transaction fees.

Only after the judgment by a U.S. district court in 2013 were credit card surcharges made legal in 40 states. 

Currently, surcharges are governed by various rules depending on the state.

State law variations in the U.S.

As of 2024, credit card surcharging is illegal in the following U.S. states:

  • Connecticut
  • Maine
  • Massachusetts

It is also illegal in the territory of Puerto Rico. 

According to a new law in New York, merchants are not allowed to display a surcharge fee for credit cards or charge separate line items for any additional fee. They are only allowed to clearly display separate prices for cash and card payments, which is in accordance with the dual pricing model and effectively makes credit card surcharges illegal.

Credit card surcharges around the world

Surcharging is treated differently in every country.

Japan, the UK, and the European Union are some of the major economies that prohibit merchants from levying a surcharge on credit card payments. Australia and India allow credit card surcharging throughout the country. In Canada, surcharging is legal in all provinces except Quebec.

China has capped the additional fees incurred by consumers at 0.45% of the transaction amount. Many other countries also allow credit card surcharge fees but have their own surcharge laws.

If a merchant sells products internationally, they can only apply a surcharge if the customer’s country allows it.

Guidelines for Implementing Credit Card Surcharges

As a merchant, adding a surcharge is at your discretion. You can add a surcharge for all credit cards or restrict it to certain types of cards. 

If you choose to apply a surcharge, there are certain surcharge rules you need to follow:

  1. All business owners that want to apply a surcharge must notify their bank and card companies of their intention at least 30 days prior and in writing.
  2. Surcharges should be applied only on credit cards and not on debit or any other prepaid cards.
  3. The surcharge percentage must be clearly displayed on the checkout page before the customer makes the final payment.
  4. In the case of in-store credit card usage, it is mandatory for stores to have signage that mentions the surcharge percentage.
  5. The surcharge amount should also be clearly displayed as a separate line item on bills. 

These guidelines are issued by credit card companies and need to be followed in all states that allow surcharging. You can also follow the below best practices in addition to these rules to ensure compliant surcharging.

Best practices for credit card surcharging

As we alluded to earlier, most customers will likely understand and comply with your surcharging program. That said, the tips below will help you create the best customer experience while minimizing your processing fees through surcharging:

  • Ensure transparency: Inform customers beforehand about the surcharge fee to have a smoother payment process. In addition to the checkout page, you can also mention the surcharge percentage on the first page of your website to ensure transparent credit card processing.
  • Cooperate with the customer: Help customers understand why surcharging is important. Have a clear surcharging policy and educate your staff to answer frequent questions that customers might have.
  • Provide alternate payment options: If customers don’t want to pay an additional fee, they need to have other convenient options. This includes providing cash discounts, having a minimum purchase requirement, or gifting loyalty points.

Surcharge the Right Way Through CardX by Stax

Surcharging helps you offset the credit card processing fee by levying an additional fee on credit card purchases. However, implementing a surcharge fee can impact your customer base and should be a well-thought-out decision. 

If you want to levy a surcharge fee, it’s best to be transparent with your customers and stay compliant with all legal guidelines to have a smooth payment experience. 

CardX by Stax can help you implement a customer-friendly and legally compliant surcharging solution that ensures you receive 100% of your credit card revenue. You can focus on product sales and other business processes while CardX handles the surcharging nuances for you. 

Ready to maximize your credit card revenue? Check out CardX for businesses.

Request a Quote

FAQs about credit card surcharges

Q: What are credit card surcharges? 

Credit card surcharges are an additional fee that businesses charge customers who choose to pay with a credit card. It’s calculated as a percentage of the purchase amount and is intended to offset the processing fees charged by credit card companies.

Q: Are credit card surcharges legal? 

Yes, in the US all states allow surcharging except Connecticut, Massachusetts, and the territory of Puerto Rico. The legality can also vary internationally, with some countries allowing it and others prohibiting it.

Q: Why do businesses add surcharges for credit card payments? 

Businesses add surcharges to credit card payments to cover the processing or interchange fees charged by credit card companies. These fees can significantly erode profits, especially for small businesses, making surcharges a way to maintain profitability.

Q: What are the guidelines for implementing credit card surcharges? 

Merchants must notify their bank and the credit card companies of their intention to apply a surcharge at least 30 days in advance and in writing. Surcharges can only be applied to credit card transactions and must be clearly disclosed to the customer before payment.