Is It Legal To Charge A Credit Card Fee


With card payments steadily replacing cash for many U.S. consumers, the issue of how to manage credit card processing fees has never been more important for merchants. In 2023, the purchase volume on Visa cards is forecast to hit $5.09 trillion, followed by Mastercard at $2.27 trillion.

Credit card fees refer to surcharges that a business pays to credit card companies in exchange for accepting credit card payments. Credit cards offer consumers a convenient payment option and the ability to earn useful perks for an annual fee, making them a must-have payment method. At the same time, credit card processing fees take a serious bite out of a retailer’s bottom line. So, can companies charge credit card fees to customers to cover the cost?

Charging fees to customers is becoming increasingly common, though the practice is tightly regulated in the places where it is legal. Merchants need to make sure they have a full understanding of their obligations under federal and state law, as well as the effect this policy could have on customers.


  • Credit card fees refer to surcharges that a business pays to credit card companies in exchange for accepting credit card payments.
  • Credit card fees are legal in almost all  U.S. states, but it’s important to check the legality and compliance regulations where your business is based.
  • Necessary practices for charging credit card fees include proper disclosure to customers, consistency, and following guidelines from credit card companies

The Legality of Credit Card Fees

The question you’re probably asking right now is: Can merchants charge a credit card fee legally?

The answer is: yes, if your business operates in states where it is legal to do so. As of the time of publishing this, the practice of imposing additional fees on credit card transactions (i.e., credit card surcharges) is prohibited in only three U.S. locations: Connecticut, Massachusetts, and Puerto Rico.

For a long time, credit card fees were prohibited by federal law. This was overturned in a class-action lawsuit against Visa and Mastercard in 2013, which awarded merchants the right to pass credit card processing fees onto consumers. Since then, many U.S. states have changed the law to make credit card surcharges legal, or have suspended laws pending other lawsuits.

It’s worth noting CardX played a pivotal role in advocating for merchant affordability and consumer fairness. CardX was the only solution provider to file a brief in Expressions Hair Design v. Schneiderman, contributing real-world expertise to a landmark U.S. Supreme Court case. In March 2017, the Supreme Court held that state “no-surcharge” laws restrict constitutionally protected speech.

Now, there are specific policies or procedures that you need to follow to be compliant with the law. It’s important that you check with the state’s Attorney General’s office to make sure you understand your obligations or work with a processor who ensures compliance.

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Factors That Determine Whether Credit Card Fees Are Legal

Surcharging vs. convenience fees

Credit card surcharges and convenience fees are often conflated in discussions about payment processing, but in reality they are two different things and different consumer protection laws apply.

A credit card surcharge is a fixed percentage fee that’s added to a credit card transaction to cover the processing cost. This allows businesses to pass on the entirety of card processing fees to the customer. It only applies to credit cards, and cannot be applied to any other form of payment.

By contrast, a convenience fee is an additional flat fee that can be applied when a merchant is offering a ‘non-standard’ form of payment. A non-standard payment differs from how the majority of customers pay for their purchases. Some examples include paying with a credit card  or payments made over the phone since they involve higher merchant fees or more work for the staff. However, a convenience fee can only be charged when alternative payment options exist.

The type of card

A credit card fee can only be charged on credit card payments and isn’t applicable on payment methods such as prepaid cards or debit card transactions, even if the card is supplied by a credit card issuer.

Credit card companies may have their own rules about when and how credit card fees are applied. For example, Visa and Mastercard require merchants to register a surcharge with the card network and for the surcharge to be added to receipts as a separate line item from the cash price.

The size of the fee

The amount that merchants charge on credit card purchases isn’t up to their sole discretion. Because credit card companies want consumers to use their cards, they have a vested interest in ensuring that retailers aren’t encouraging customers to use other providers by setting surcharges too high.

Both Visa and Mastercard offer merchants a choice between using either a card brand level surcharge, which applies to any credit card belonging to their network, or a product level surcharge, which applies to a specific credit card product. On April 15, 2023 Visa will changes their brand rules to set the maximum surcharge at 3%. This change resulted in a requirement for merchants to lower the surcharge cap to 3% for all brands’ credit cards when Visa is accepted.

Benefits and Drawbacks of Charging Credit Card Fees

Pros of charging credit card fees Cons of charging credit card fees
Higher profits Can be complex to implement (if you aren’t using a solution like CardX)
Promotes pricing transparency and keeps customers informed Can lead to customer dissatisfaction if not implemented appropriately 
Can incentivize lower-cost payment methods

Advantages for merchants

Higher profit margins. Credit card processing fees quickly add up. Passing these costs onto your customers allows retailers to offset these costs while still offering multiple payment options so they can opt out of the fees by paying with debit.

Disadvantages for merchants

Potential to lose sales to competitors. Extra fees may be one reason for cart abandonment in retail, so it’s important to recognize that credit card surcharges could result in customers choosing to shop with a different vendor. Providing customers with the ability to pay with another payment method not only ensures compliance but also allows customers to bypass any unwanted fees.

Staying compliant. Merchants who decide to charge credit fees need to ensure they are compliant with federal laws, state laws, and card credit network rules. This requires considerations such as in-store signage, updating your website, and making sure you’re staying up to date with any changes that might put you in infringement.

Alternative ways to lower credit card fees

Rather than simply adding on a surcharge and calling it a day, business owners can create a more favorable long-term result for their business by finding ways to lower their credit card processing fees. This way, if it does become necessary to add a surcharge, it will add far less friction to the customer experience.

Offer a discount on cash transactions

Offering cash discounting on payment options like cash or debit card uses positive reinforcement to encourage cardholders to switch their payment method. Just bear in mind that this can end up being tricky to implement, especially for larger businesses—and accounting will need to be tracked precisely

Reduce the risk of credit card fraud

If a merchant is considered high risk due to repeated fraud incidences or chargebacks, credit card processors may apply higher processing fees to cover the cost of resolving incidents. By undertaking strategies to reduce the risk of fraud, merchants can lower their credit scores and credit card processing costs. Easy ways to make transactions more secure include:

  • Ensuring credit card payments are swiped instead of keyed-in (almost all payment processors charge more for keyed-in payments due to fraud risk).
  • Validate the address details of the cardholder for online purchases.
  • Stay PCI compliant.

Find a provider who uses transparent pricing

Credit card processing costs are made up of two different fees. The interchange fee represents the cost paid to the credit card network and the financial institution, while the markup fee is charged by the payment processor.

One of the biggest challenges for merchants is that there can be limited transparency over how processing fees are calculated. If a processor uses tiered pricing, which bundles the interchange and the markup fee together, it’s impossible to know what hidden fees they might be charging.

By choosing a payment processor with a straightforward pricing model, merchants have full transparency over what they are being charged. For example, Stax charges merchants only the cost of the interchange fee in addition to a flat monthly subscription, ensuring that retailers won’t get surprised by hidden fees.

Best Practices For Charging Credit Card Fees

Proper disclosure and transparency

If you’re going to add a credit card surcharge, this needs to be communicated to your customers before the transaction and on their receipt of the purchase. In addition to the size of the surcharge, it’s also a good idea to explain why the charge exists.

If you’re a small business, consider adding a sign at the checkout explaining how credit card processing affects your profit margins to help customers understand that you’re only charging what is necessary to maintain profit margins. This helps to remove friction from the checkout process and alleviate customer frustration.

Consistency in your fee application

No matter how big or small your credit card fee is, it needs to stay consistent across transactions as stated in your policy. Otherwise, you should be at risk of infringing surcharge laws. It’s also important to ensure that your staff are up to speed on your surcharges policy and won’t accidentally apply the wrong amount and upset customers.

Following guidelines from credit card companies

Every credit card company sets its own guidelines for when and how credit card surcharges can be used, so they don’t lose ground to competitors. Merchants must comply with current surcharge guidelines to avoid penalties or legal challenges.

While credit card surcharges are more widely applicable in the U.S., it’s important to be aware of the relevant rules and regulations regarding credit card fees. This includes:

  • The size of the surcharge.
  • When/how surcharges can be applied.
  • How the customer needs to be informed of surcharges.

Interested in lowering your credit card processing costs to zero? CardX offers a seamless solution to help merchants comply with surcharging laws. The platform works online, in offices, and in-store. Check out CardX today.

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