For the business case, implementation approach, and whether surcharging makes sense for you, see Surcharging in Payments. This page covers the compliance rules.
Surcharging Rules
On this page
Credit card surcharging is legal in most US states but subject to network caps (Visa 3%, Mastercard 4%) and the lower of your actual merchant discount rate. Prohibited entirely in Connecticut, Maine, Massachusetts, and Puerto Rico. Never surcharge debit or prepaid cards. Requires 30-day advance notice to networks, clear customer disclosure at entry and point of sale, and separate line item on receipts.
What is Surcharging?
A surcharge is a fee added to a transaction when a customer pays with a credit card. It's designed to offset the merchant's cost of accepting credit cards.
Surcharging was prohibited by card network rules until a 2013 class action settlement (In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation) allowed merchants to surcharge in states where it's legal.
Related Concepts
| Term | Definition | Key Difference |
|---|---|---|
| Surcharge | Fee added for credit card payment | Added to base price |
| Convenience Fee | Flat fee for alternate payment channel | For non-standard channels only |
| Cash Discount | Lower price for paying with cash | Base price is credit price |
| Service Fee | General fee not specific to payment | Not payment-method specific |
Understanding these distinctions matters because each has different rules and restrictions.
Network Surcharging Rules
Visa Requirements
Cap: 3% of transaction OR your merchant discount rate, whichever is lower
Advance Notice:
- Notify Visa and your acquirer 30 days before implementing
- Register at www.visa.com/merchantsurcharging
Card Type Restrictions:
- Credit cards only
- Never surcharge debit or prepaid cards (even if cardholder selects "credit" at point of sale)
Disclosure Requirements:
- Clear disclosure at store entrance or website homepage
- Clear disclosure at point of sale before payment processed
- Separate line item on receipt (not buried in subtotal)
Equal Treatment:
- Must surcharge Visa on same terms as equal-or-higher-cost competitors
- Brand-level or product-level surcharging permitted
Non-Compliance Penalties:
- Visa enforcement actions can result in significant fines
- Penalties range from tens of thousands to over a million dollars in severe cases
Mastercard Requirements
Cap: 4% of transaction OR your merchant discount rate, whichever is lower. Note: as part of the 2024 Mastercard class action settlement (pending final approval), Mastercard agreed to reduce the surcharge cap. Check current status, as this may change.
Advance Notice:
- Written notice to Mastercard and acquirer 30 days before start
- Acquirer forwards notification to Mastercard
Card Type Restrictions:
- Credit cards only
- Never surcharge debit or prepaid cards
Disclosure Requirements:
- Clear disclosure required at all customer touchpoints
"Free processing" programs offering 3.5-4% surcharges violate Visa's 3% cap. Many programs also fail disclosure requirements. Non-compliant merchants face significant fines.
State-by-State Surcharging Status
States Where Surcharging is Prohibited (as of 2025)
| State | Status | Notes |
|---|---|---|
| Connecticut | Prohibited | No surcharges allowed |
| Maine | Prohibited | No surcharges allowed (5 M.R.S. 3732) |
| Massachusetts | Prohibited | No surcharges allowed |
| Puerto Rico | Prohibited | Territory prohibition |
Several other states impose strict limits or are in flux (e.g., Maine, Oklahoma). State surcharging laws change frequently. Always verify current law with local counsel before implementing a surcharge program.
States with Specific Restrictions
| State | Restriction | Details |
|---|---|---|
| Colorado | 2% cap | Lower than network caps |
| New York | Complex | Must display total credit card price; restricts how surcharges shown |
| New Jersey | Cost limit | Cannot exceed actual processing cost |
| Nevada | Cost limit | Cannot exceed actual processing cost |
| South Dakota | Cost limit | Cannot exceed actual processing cost |
| Minnesota | Disclosure rules | Mandatory fees must be in advertised price (Jan 2025) |
| California | Effectively prohibited | SB 478 (July 2024) bans displaying prices below total cost; surcharging is no longer viable for most merchants |
| Texas | Complex/Evolving | State law prohibits but federal courts ruled unconstitutional; AG says enforceable |
New York Detail: NY law requires merchants to display the full credit card price upfront. Many merchants adopt cash-discount style presentation to stay compliant.
California Detail: SB 478 (effective July 1, 2024) prohibits displaying prices below the total cost including all mandatory fees. While a surcharge is theoretically an 'avoidable' fee, the practical effect is that surcharging is no longer viable for most California merchants. Most industry advisors now recommend treating California as a no-surcharge state.
Texas Detail: Very state-specific. Federal courts have ruled the prohibition unconstitutional, but the state AG maintains it's enforceable. Consult local counsel.
States Where Surcharging is Generally Permitted
Remaining ~40 states allow surcharging subject to network rules and general disclosure requirements. However, always verify current status before implementing.
Implementation Requirements
Before Surcharging
- Confirm state law allows surcharging in all locations where you operate
- Determine your merchant discount rate (MDR) for applicable cards
- Set surcharge at the lower of MDR or network cap (3% for Visa)
- Notify Visa: www.visa.com/merchantsurcharging
- Notify Mastercard: Written notice to acquirer who forwards to Mastercard
- Wait 30 days before implementing
Disclosure Requirements
| Touchpoint | Requirement |
|---|---|
| Entry point | Sign at store entrance or website homepage |
| Point of sale | Clear notice before payment is processed |
| Receipt | Surcharge as separate line item |
| Online | Visible before checkout completes |
Signage Examples
Visa provides sample compliant signage at: https://usa.visa.com/support/small-business/regulations-fees.html
Sample In-Store Sign:
"We impose a surcharge on credit card transactions that is not greater than our cost of acceptance. We do not surcharge debit cards."
Sample Online Disclosure:
"A [X]% surcharge will be added to credit card transactions. This fee covers our cost of accepting credit cards. Debit cards are not surcharged."
Surcharging vs. Cash Discount Programs
| Feature | Surcharging | Cash Discount |
|---|---|---|
| Listed price | Base price (lower) | Credit card price (higher) |
| Adjustment | Fee added for credit | Discount for cash |
| Perception | Penalty for using card | Reward for using cash |
| Disclosure | Network-mandated requirements | State consumer protection laws |
| Debit cards | Cannot surcharge | Discount applies to cash only |
| Network notification | Required 30 days in advance | Not required |
New York Implications (Feb 2024)
New York law requires merchants to display the full credit card price upfront, rather than a lower pre-surcharge subtotal. In practice this makes the traditional "base price + separate card surcharge line item" model very difficult.
Common Approaches in NY:
- Use a cash-discount approach (list higher price, discount for cash)
- Show only the final card price (no line-item surcharge)
Convenience Fees
Convenience fees are NOT surcharges and have different rules.
Requirements
- Must be for bona fide alternate payment channel
- Flat fee (not percentage)
- Channel must be different from merchant's normal payment method
- Cannot charge if merchant only accepts cards
- Cannot charge if merchant is 100% card-absent
Eligible Merchants
Convenience fees are typically appropriate for:
- Government agencies (paying taxes online when mail is standard)
- Educational institutions (tuition payments)
- Utility companies (bill payments)
- Other merchants with primary non-card payment channel
Example
A utility company that normally accepts payments by mail or in person can charge a convenience fee for paying by phone or online, since those are alternate channels.
A retailer that primarily accepts cards cannot charge a convenience fee for card payments.
Issuer Perspective
As an issuer, surcharging affects your cardholders:
Potential Impacts:
- Cardholders may avoid cards with high surcharges
- Complaints about "hidden fees" may increase
- Some cardholders may switch to debit to avoid surcharges
Issuer Options:
Issuers cannot directly prevent compliant surcharging but can:
- Educate cardholders about surcharge limits and rights
- Provide information about disputing non-compliant surcharges
- Monitor for reports of excessive or deceptive surcharging
- Report non-compliant merchants to networks
Compliance Monitoring
For Acquirers
- Ensure merchants have properly notified networks before surcharging
- Monitor for excessive surcharge percentages (above caps)
- Respond to cardholder complaints about surcharging
- Note: Visa conducts mystery shopping audits for compliance
For Merchants
Documentation to Maintain:
- Your merchant discount rate (to prove surcharge doesn't exceed it)
- Network notification confirmations
- Staff training records on disclosure requirements
- Photos of compliant signage
Ongoing Compliance:
- Train staff on proper disclosure
- Audit receipts for correct line-item display
- Monitor customer complaints
- Update signage if rates change
Common Compliance Failures
| Failure | Why It's a Problem |
|---|---|
| Surcharging debit cards | Never permitted, even if "credit" selected |
| Exceeding network caps | 3% Visa max often violated |
| No advance notice | Must notify networks 30 days prior |
| Missing disclosures | Required at entry, POS, and receipt |
| Surcharging in prohibited states | CT, ME, MA, PR outright bans |
| Burying surcharge in total | Must be separate line item |
Wondering if surcharging is worth it for your business? See Surcharging in Payments for the business case, ROI calculation, and implementation approach.
Trying to reduce processing costs without surcharging? Start with Understanding Your Costs - many merchants save more by switching pricing models than by surcharging.
Next Steps
Evaluating surcharging?
- Check state-by-state status - Prohibited in CT, ME, MA, PR
- Understand network rules - Visa 3%, Mastercard 4%
- Compare to cash discount - Different rules
Implementing surcharging?
- Follow implementation requirements - Notify, wait, disclose
- Set up disclosures - Entry, POS, receipt
- Avoid common failures - Debit, caps, states
For acquirers and issuers?
- Monitor compliance - Acquirer responsibilities
- Understand issuer impact - Cardholder effects
- Track violation patterns - What to watch for
Before adding a surcharge, check whether you're overpaying in the first place. Many merchants on flat-rate pricing (2.9% + $0.30) would save more by switching to interchange-plus pricing than by surcharging. See Understanding Your Costs and Buying Payments for the full breakdown.
See Also
Network and compliance:
- Network Rules Overview - Full network rule reference
- Dispute Monitoring Programs - VAMP, ECM thresholds
- Compliance Metrics - Measuring compliance health
Cost and pricing:
- Buying Payments - Choosing and negotiating with processors
- Understanding Your Costs - Interchange, markups, hidden fees
- Industry Benchmarks - What "normal" processing costs look like
External references:
- Visa Merchant Surcharging - Registration and signage
- Mastercard Rules - Mastercard compliance standards