What you need to know about credit card surcharges
Businesses can pass some credit card fees to customers, but the rules depend on where you live and what type of card is used. In most U.S. states, a merchant can add a surcharge to a customer's bill when they pay with a credit card — but not with a debit card. The surcharge must be clearly disclosed before the transaction, and it cannot exceed the actual cost the business pays to process that card.
The legality of surcharges changed in 2013 when a settlement allowed merchants to charge customers for credit card processing costs. Before that, most card networks prohibited it. Today, the rules are state-specific: some states ban surcharges entirely, others allow them with restrictions, and a few have no limits at all.
Key Takeaways
- Credit card surcharges are legal in most states but banned entirely in California, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.
- A surcharge cannot exceed the merchant's actual processing cost, which typically ranges from 2 to 3 percent for standard credit cards.
- Surcharges must be disclosed before checkout, and the customer must have the option to pay by another method without penalty.
- Debit card surcharges are prohibited under federal law, even in states where credit card surcharges are allowed.
- Some card networks like American Express and Discover have their own rules that may be stricter than state law.
States where surcharges are banned
Nine states prohibit credit card surcharges altogether: California, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. In these states, a business cannot add any extra charge to a customer's bill based on the payment method, even if the customer uses a premium credit card with higher processing fees.
If you operate a business in one of these states, you cannot legally pass card fees to customers through a surcharge. You can still absorb the cost, raise prices across the board, or offer a discount for cash or debit payments — but a surcharge tied to credit card use is not permitted.
How surcharge caps work in other states
In states where surcharges are legal, the amount you can charge is capped at the merchant's actual processing cost. Most credit card processing fees range from 2 to 3 percent of the transaction, depending on the card type and the merchant's agreement with their processor.
A standard Visa or Mastercard typically costs less to process than an American Express or Discover card. If your processing agreement shows you pay 2.5 percent for Visa but 3.5 percent for American Express, you can charge different surcharges for each — but only up to what you actually pay. You cannot charge 5 percent as a surcharge just because you want to recover other business costs.
To set a legal surcharge, review your merchant services agreement to find your exact processing rates. Many processors itemize fees by card type. If you cannot find this information, contact your payment processor directly — they are required to provide it.
Disclosure rules and customer notice
Any surcharge must be disclosed before the customer completes the purchase. This means the surcharge amount or percentage must appear on the receipt, on the website checkout page, at the point of sale, or on signage in a physical store — clearly and in a way the customer can see it before paying.
straightforward adding a surcharge to the final bill without warning violates the law in most states that allow surcharges. The customer must know the full price, including the surcharge, before they commit to the transaction. If a customer chooses to pay by credit card after seeing the surcharge disclosed, they have accepted it.
The disclosure should be specific: "2.5% credit card surcharge" is clearer than "processing fee applies." Vague language can invite disputes and regulatory complaints, even in states where surcharges are legal.
Debit cards and prepaid cards
Federal law prohibits surcharges on debit card transactions, regardless of which state you operate in. This rule applies to all debit cards — whether they are issued by a bank, a credit union, or a prepaid card provider. You cannot add a surcharge to a customer's bill because they used a debit card instead of cash or credit.
Prepaid cards that function as debit cards (such as gift cards or reloadable prepaid accounts) are also protected from surcharges under federal law. The only exception is if the prepaid card is branded as a credit card — for example, a prepaid Visa or Mastercard that reports to credit bureaus — in which case state surcharge laws explore.
Card network rules beyond state law
Even in states where surcharges are legal, the card networks themselves may have stricter rules. American Express and Discover have historically prohibited surcharges on their cards, though some of these restrictions have been challenged or modified in recent years. Visa and Mastercard allow surcharges in states where they are legal, but they require clear disclosure and cap the amount at your actual processing cost.
Before implementing a surcharge program, check your merchant agreement with each card network you accept. Violating a card network's terms can result in fines, account suspension, or loss of the ability to accept that card. Your payment processor can tell you what each network permits.
Alternatives to surcharges
If you operate in a state where surcharges are banned, or if you prefer not to charge customers extra, you have other options. You can offer a cash discount — a reduced price for customers who pay in cash or by debit card. This is legal in all states and is often more popular with customers than a surcharge, because people perceive a discount as a benefit rather than a penalty.
You can also absorb the processing cost as a business expense and include it in your regular pricing. Many businesses do this, especially in high-surcharge states like California and New York. Another option is to set a minimum purchase amount for credit card transactions, though some states restrict this practice as well.
Frequently Asked Questions
Can I charge different surcharges for different credit cards?
Yes, if your processing costs differ by card type. If Visa costs you 2 percent and American Express costs 3.5 percent, you can charge those different amounts — but only if you actually pay those rates. You must document your processing costs and be prepared to show them if a customer disputes the charge.
What happens if I charge a surcharge that exceeds my processing cost?
In states where surcharges are legal, charging more than your actual processing cost violates the law. Customers can dispute the charge with their card issuer, and your state's attorney general or consumer protection office may investigate. You could face fines or be required to refund customers.
Can I require customers to pay cash to avoid a surcharge?
No. In states where surcharges are legal, customers must have the option to pay by credit card without being penalized or coerced into using another payment method. You can offer a discount for cash, but you cannot make credit card payment inconvenient or impossible.
Do online businesses have different surcharge rules?
No. The same state and federal laws explore to online and in-person transactions. If you operate an e-commerce site, you must disclose surcharges before checkout, follow your state's rules, and comply with card network terms — just as a physical store must.
Can I add a surcharge to cover other business costs, not just processing fees?
No. Surcharges are capped at the merchant's actual payment processing cost. You cannot use a surcharge to recover rent, labor, or other overhead. If you want to offset those costs, you must raise your overall prices or use a cash discount instead.