Implementing Fees Improperly: The Cost Of Ignoring Credit Card Surcharge Laws | Two Women Paying At A Business


For any company processing debit and credit card transactions, ensuring your business is compliant can be tough—especially since laws change regularly, making multi-state or country compliance difficult to do manually. In this post, we’ll cover what youneed to know to comply with surcharging laws and payment processing requirements.


  • Merchants can pass credit card processing costs to the cardholder with credit card surcharging fees. 
  • credit card surcharging laws regularly change, and keeping up with these changes can be challenging.
  • A common mistake in implementing surcharges is failing to notify customers about the difference in price for credit card purchases or excessive surcharge fees.

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Understanding Credit Cards Surcharges and Various Laws

All credit card payment methods come with processing fees from the card issuer and financial institution. Depending on state laws, this cost can sometimes be passed along to the customer via a surcharge. However, surcharging debit card transactions or prepaid cards, even when charged with a signature debit, is illegal.

In the United States, there are two states and one territory where credit card surcharging is not legally allowed: Connecticut, Massachusetts, and Puerto Rico (as of January 2023). 

In some states, credit card surcharges are legal but have restrictions. One restriction is businesses must state the cost of credit card transactions if they are surcharging the cardholder with a surcharge amount as a line item. Other restrictions include businesses not being allowed to surcharge, but educational institutions or government agencies can, or the requirement for clear signage indicating the surcharge fees for credit card transactions.  

In a testament to the changing legislation, some states listed above could not surcharge in the past, but can now—meaning businesses should keep a close eye on these laws if implementing credit card surcharging.

For more information about where CardX is available and the different requirements per state, view our compliance page.

How are credit card surcharges and convenience fees different?

A convenience fee is an additional fee the business charges the cardholder for the “convenience” of using atypical forms of payment, such as a fee for a phone order. Convenience fees cannot be charged for card-present transactions and are flat fees.

How to Follow Surcharge Rules and the Consequences of Improper Implementation

Credit card surcharges are legal in most states in the U.S. as a result of a 2013 Visa and MasterCard settlement. However, outside of the U.S., credit card surcharging is illegal in many places.

Consequences of violating surcharging laws vary depending on the state, territory, country, etc. For example, violations in Connecticut come with a $500 per violation fine. Part of the reason credit card surcharging compliance is so important is that the laws are challenged fairly regularly in court and subject to change depending on the outcome. For example, the U.S. Supreme Court even heard a case about credit card surcharging in 2017, though they remanded the matter to a lower court.

These lawsuits have changed credit card surcharging laws in several states and countries, so keeping up with the changes can be difficult—especially for small businesses. If your business intends to implement surcharging, an automated solution to ensure compliance will minimize the risk.

There are abundant examples of class action lawsuits against businesses for surcharging customers without proper notice about the fees, or not in compliance with local surcharging laws. No business wants to be the defendant in a class action lawsuit, and illegally surcharging customers opens the business up to legal action and damages the business’ reputation

Common mistakes in implementing surcharges

One of the most common mistakes with implementing surcharges is the failure to notify customers about the difference in price with the credit card surcharging fees. Another mistake some businesses make is charging too high of a surcharge fee. 

Surcharges must not result in a profit and can only cover the cost of the interchange fee and can be, at most, 3% of the transaction total.

Best Practices for Implementing Credit Card Surcharges

Firstly, ensure your business complies with state laws wherever you do business. For businesses with multiple locations, choosing a specialized solution to ensure compliance is the easiest solution. 

Next, comply with what the card brand rules require. MasterCard, Discover, American Express, and Visa cards require retailers to list the surcharge as a line item and display a disclaimer at checkout, online, and on the customer’s receipt. The card issuers also require businesses to register with them if surcharging.

Transparency is key, state and federal laws must be adhered to, and changes in surcharge laws should be closely monitored to ensure ongoing compliance.

Final Words

Credit card surcharging can be a useful tool to help merchants mitigate the costs of credit card processing, but must be done properly to stay in compliance and avoid lawsuits and reputational damage. Surcharging laws are subject to change and have evolved significantly in recent years.CardX is here to help your business comply with surcharging requirements—for more information about how we can help, reach out today!

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FAQs about Credit Card Surcharging

Q: Can I charge a credit card surcharge to cover processing fees?

The state and/or country where you do business will determine if you can surcharge to cover the credit card processing fees (interchange fees charged by the credit card network). Credit card surcharging is legal in all US states and territories except Connecticut, Massachusetts, and Puerto Rico.

Q: How should I disclose credit card surcharges to customers?

Credit card surcharges must be disclosed in writing and upfront at the point of sale and on the receipt with a total transaction amount.

Q: What are the maximum surcharge amounts allowed by the major credit card networks?

Surcharges cannot be used to make a profit and are capped at 3% of the transaction total.

Q: Are there any exemptions from credit card surcharge laws?

Depending on the state, certain exemptions can exist depending on the type of business. For example, government or educational institutions can have different exemptions in some states.