A federal court blocked the Biden administration's rule on credit card surcharges in April 2024
In April 2024, a federal appeals court struck down a rule proposed by the Consumer Financial Protection Bureau (CFPB) that would have limited the surcharges merchants can add when you pay with a credit card instead of cash. The rule would have capped those surcharges at 1 percent of the transaction amount. The court found that the CFPB did not have the legal authority to set this limit, and the rule cannot take effect.
This means that for now, merchants can continue charging whatever surcharge they want when you use a credit card — there is no federal cap. Some states and cities have their own surcharge laws, but those vary widely. Understanding what happened and how it affects you as a cardholder requires knowing what the rule was supposed to do and why the court rejected it.
Key Takeaways
- The CFPB's 1 percent surcharge cap was blocked by a federal court in April 2024 and will not take effect.
- Merchants can now charge any surcharge they want when you pay with a credit card, with no federal limit.
- Some states and cities have their own surcharge rules that may protect you, depending on where you live and shop.
- The court ruled the CFPB lacked the legal power to create this rule, not that the rule itself was unfair.
- You may see surcharges listed at checkout or on your receipt, and you can choose to pay with cash or another method to avoid them.
What the blocked rule would have done
The CFPB rule would have capped credit card surcharges at 1 percent of the purchase price. A surcharge is an extra fee a business adds to your bill when you choose to pay with a credit card instead of cash, debit, or another payment method. Under the proposed rule, a $100 purchase could not have had more than a $1 surcharge added to it.
The rule also would have required merchants to disclose surcharges clearly before you completed the purchase, so you would know the full cost before deciding whether to pay with a card. The CFPB argued that unlimited surcharges hurt consumers and that merchants were already passing credit card processing fees to cardholders unfairly.
Why the court rejected the rule
The U.S. Court of Appeals for the D.C. Circuit ruled that the CFPB did not have the legal authority to create this rule. The court did not say the rule was unfair or bad policy — it said the law does not give the CFPB the power to set surcharge limits. The court pointed to the text of the Credit Card Accountability Responsibility and Disclosure Act (CARD Act), which governs credit card practices.
The CARD Act does prohibit surcharges in some narrow cases — for example, when a merchant charges more for credit than for debit. But the law does not give the CFPB a broad power to cap all surcharges. The court found that the CFPB was trying to do something Congress did not authorize it to do, so the rule was invalid.
What surcharges look like now
With no federal cap in place, merchants can charge any surcharge they choose. Some charge 2 to 3 percent, others charge more. You will usually see the surcharge listed at checkout on a website, or it will be added to your receipt in a store. Some merchants disclose it clearly; others bury it in fine print.
Surcharges are most common in industries where credit card processing costs are high — restaurants, gas stations, and small retailers often use them. Large chains and online retailers less often charge surcharges, though some do. The amount and visibility of surcharges vary by business and location.
State and local surcharge laws that may still protect you
Even though the federal rule is blocked, some states and cities have their own surcharge rules. New York, California, Texas, Florida, and several other states prohibit surcharges entirely or cap them. Some cities have local rules as well. These laws vary — some ban surcharges outright, others cap them at a percentage, and others require clear disclosure.
If you live in or are shopping in a state or city with a surcharge law, that law still applies to merchants in that area. You should check your state's attorney general website or your city's consumer protection office to learn what the rule is where you live. A merchant that violates a state or local surcharge law can be reported to that state's attorney general or the local consumer protection agency.
How to avoid surcharges when you shop
The simplest way to avoid a surcharge is to pay with a payment method the merchant does not surcharge. Most merchants do not surcharge debit cards, cash, or checks. If a merchant is charging a surcharge for credit cards, ask whether they charge for debit as well — many do not.
Before you complete a purchase, look for surcharge disclosures at checkout. If you see a surcharge listed, you can choose to pay a different way or shop elsewhere. Online, surcharges are usually shown before you enter your payment information. In stores, ask the cashier whether a surcharge will be added before you hand over your card.
What could happen next
Congress could pass a new law that gives the CFPB or another agency the power to cap surcharges. This would require action by both the House and Senate and the President's signature. There is no current bill moving through Congress to do this, but consumer groups continue to advocate for surcharge limits.
The CFPB could also try to write a new rule using different legal language, though the court's decision makes that difficult. The agency would have to find a different part of the law that gives it the authority to act. For now, the blocked rule is the end of the matter, and merchants can charge surcharges without a federal limit.
Frequently Asked Questions
Can a merchant charge a surcharge for credit cards but not debit cards?
Yes, under federal law. The CARD Act prohibits surcharges that are higher for credit than for debit, but it does not prohibit surcharges on credit cards alone. Many merchants charge surcharges only for credit cards and not for debit. Check your state or local law — some places ban all surcharges regardless of payment type.
Is a surcharge the same as a convenience fee?
Not exactly. A surcharge is a fee added because you chose a particular payment method. A convenience fee is usually charged for using a non-standard payment channel, like paying a utility bill online instead of by mail. The rules around them are different, and convenience fees are less regulated than surcharges.
What should I do if a merchant charges a surcharge that violates my state's law?
Report it to your state's attorney general office or your city's consumer protection agency. Include the merchant's name, location, the date, and the amount of the surcharge. These agencies investigate complaints and can take action against merchants that break state or local law.
Will my credit card company refund a surcharge I paid?
Probably not. The surcharge is a fee charged by the merchant, not by your credit card company. Your card company does not control what merchants charge. If you believe the surcharge was illegal under your state's law, contact your state's attorney general instead of your card company.
Could the rule be reinstated if there is a change in administration?
Not without a change in law. The court ruled that the CFPB does not have the legal authority to create this rule, regardless of who leads the agency. A future administration could propose a different rule or Congress could pass a new law, but the current blocked rule cannot straightforward be reinstated.