Charging Customers a Card Fee (Surcharging Rules)
- Check the law where you sell. California's pricing rule isn't a blanket surcharge ban. Oklahoma has a lower cap than the networks
- In the US, Visa caps surcharges at the lower of your applicable merchant discount rate or 3%. Mastercard's brand-level cap is the lower of its average effective merchant discount rate or 4%. State law and competing-brand conditions can be tighter
- Never surcharge debit or prepaid. Not even when the cardholder picks "credit" at the terminal. It's the violation processors see most
- Give your acquirer 30 days' notice for Visa. Mastercard also requires notice to Mastercard. Disclose the fee before payment and on the receipt
- A "free processing" pitch at 3.5-4% is a Visa violation
- If your state bans it, check whether a cash discount fits. Follow state pricing laws and Visa's display rules
You want to stop eating 3% on card sales. You've been told you can just pass it to the customer. Sometimes you can. Three things decide it. Your state's law, the network caps, the disclosure rules. Not hard, just specific. Get one wrong and it's a fine instead. This page is the compliance side. For whether it's worth doing at all, see Surcharging in Payments.
What is Surcharging?
A surcharge is a fee added for paying by credit card. It covers what the card costs you to accept.
Network rules banned it outright until 2013. A class action settlement opened it up. That was In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation. State law still decides where you can do it.
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 |
The distinctions matter. Each one carries its own rules. Calling a surcharge a "convenience fee" doesn't change which rules apply.
Network Surcharging Rules
Visa Requirements
Cap: 3% of transaction OR your merchant discount rate, whichever is lower
Advance Notice:
- Notify your acquirer at least 30 days before implementing. Follow its setup instructions.
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)
Choose a surcharge mode:
- Brand-level means the same percentage across that network's credit cards.
- Product-level targets a particular credit-card product within that network. Visa permits one mode, not both.
- These aren't a promise of equal rates across networks. Check competing-brand conditions with your acquirer. Visa FAQ; Mastercard guidance.
Non-Compliance Penalties:
- Visa enforcement actions can result in significant fines
- Visa's US FAQ says an improper surcharge can bring an immediate US$1,000 assessment on the acquirer. Confirm any pass-through with yours. NETWORK Visa FAQ, checked 22 October 2026.
Mastercard Requirements
US brand-level cap: the lower of your average effective Mastercard merchant discount rate or 4%. Product-level surcharges have a separate cost-based calculation. Competing-brand restrictions and state law still apply. A proposed Visa and Mastercard settlement would let merchants surcharge or decline some categories of credit card. Visa's 9 June 2026 statement says it has preliminary court approval and is "subject to final approval", so none of it applies yet. Visa statement. What it would change, and when: the proposed settlement. Mastercard's merchant guidance, checked 21 October 2026.
Advance Notice:
- Written notice to Mastercard and acquirer 30 days before start
- Complete Mastercard's merchant notification process as well as the acquirer's process; don't assume one substitutes for the other
Card Type Restrictions:
- Credit cards only
- Never surcharge debit or prepaid cards
Disclosure Requirements:
- Clear disclosure required at all customer touchpoints
Visa caps you at 3%. So a "free processing" program pitching 3.5-4% is pitching a violation. Most of them miss the disclosure requirements too. The fines land on you. Not on the reseller who sold it.
Can I refuse rewards cards yet? The proposed settlement
Not yet. Checked 22 October 2026: nothing in the proposed Visa and Mastercard settlement applies. Preliminary approval came on 9 June 2026. The final approval hearing is set for 16 November 2026. The settlement site says "We do not know how long the Court will take to make its decision". Until then, the caps and state laws on this page are the rules. Court-authorized settlement site and FAQ, checked 22 October 2026.
If the court approves it, the settlement site lists these changes for US merchants:
| What would change | What the settlement site says |
|---|---|
| Refusing card types | Accept or decline all commercial credit cards, all standard consumer credit cards and all premium consumer credit cards, choosing separately for Visa and Mastercard. "Premium" is the settlement's word for those cards, and issuers would mark new premium and commercial cards so you can tell them apart |
| Surcharging | Credit cards, not debit. Up to 3%, or your cost of acceptance if that's lower, on a whole brand or one card product |
| Rates | Standard consumer credit interchange capped at 1.25% for eight years. Posted credit interchange rates can't rise above their 31 March 2025 level for five years. For five years, each network's average effective credit interchange rate must be at least 0.10 percentage points below the two networks' combined, volume-weighted average for the year ending 31 March 2025 |
| How long | The rule changes last at least eight years, unless the agreement says otherwise |
When does my rate drop? The site gives no date. It says the rate caps begin "upon the Court's approval of the Settlement Agreement and when the Average Effective Rate Limit goes into effect". The 0.10 points is a network-wide average, not a figure for your statement. After the hearing, ask your processor:
Has the settlement been approved? Which of my card rates change, and from what date? Will you pass the change through on my pricing?
Your state's surcharge law still applies either way: the settlement's own merchant education covers states that restrict surcharging. Recheck this section after the 16 November 2026 hearing.
State-by-State Surcharging Status
States Where Surcharging Is Banned Outright
| State | Status | Notes |
|---|---|---|
| Connecticut | Prohibited | No surcharges allowed |
| Maine | Seller surcharges prohibited | 9-A section 8-509(1) covers credit and debit. Subsection 2 has a conditional governmental-entity exception. |
| Massachusetts | Prohibited | No surcharges allowed |
| Puerto Rico | Prohibited | Territory prohibition |
The other state rows retain their older verification dates. The Oklahoma, Maine, California and Louisiana entries were checked 21 October 2026, and Illinois on 23 October 2026. This isn't a fresh check of every state. Confirm local law before switching on a surcharge.
States with Specific Restrictions
| State | Restriction | Details |
|---|---|---|
| Oklahoma | Lower of 2% or actual processing cost | Effective 1 November 2025 under SB 677, section 1. Disclosure duties also apply. Don't treat a network cap as permission to charge more. Enrolled law. |
| Louisiana | Debit-card surcharge prohibited | Retail sales of goods or services, effective 1 August 2026. This isn't a credit-card surcharge ban. Act 751, section 51:3081(B); effective-date record. |
| Illinois | Interchange on tax and tip, from 1 July 2027 | This concerns the fees paid to issuers. Court orders limit who it applies to. Tax and tip in Illinois. |
| Colorado | Check the cost-based alternative too | The AG's July 2022 guide describes either up to 2% or actual processing cost, with disclosures. Confirm the current law and tighter network conditions before choosing. Colorado AG guide, checked 22 October 2026. |
| 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 | Pricing conditions | An avoidable card fee generally needn't be in the advertised price under SB 478. Credit-card-only acceptance makes it mandatory. Other rules still apply. |
| Texas | Complex/Evolving | State law prohibits but federal courts ruled unconstitutional; AG says enforceable |
New York: display the full credit card price up front. Most New York merchants switch to cash-discount presentation instead. It's the cleanest way to comply.
California: check whether customers can avoid the fee by paying another way. The AG says an avoidable card fee generally isn't mandatory under SB 478. If you only accept credit cards, include the mandatory card fee in the advertised price. AG FAQ.
Texas: unresolved. Federal courts ruled the prohibition unconstitutional. The state AG says it's still enforceable. Don't be the test case. Talk to local counsel first.
Do I have to split out tax and tip in Illinois?
Ask your processor whether your checkout can send tax and tip amounts separately. The Illinois Interchange Fee Prohibition Act (IFPA) links reporting to its interchange exclusion. There's also a later documentation route below. Its start date is 1 July 2027. It concerns interchange paid to card issuers. It doesn't change the debit surcharge ban.
As written, the IFPA bars interchange on the Illinois state or local use and occupation or excise tax you collect and remit, and on voluntary tips to employees. To get that exclusion, send the amounts to your acquirer or its designee during authorization or settlement. Didn't send them? You can submit tax documentation to the acquirer or its designee within 180 days of the payment. The issuer must credit that interchange within 30 days after you submit the necessary documentation. 815 ILCS 151, sections 150-5, 150-10 and 999-99, checked 23 October 2026.
Court status, checked 23 October 2026: A permanent injunction entered on 28 September 2026 bars Illinois from enforcing the interchange limit against national banks, federal savings associations, federal credit unions and banks chartered outside Illinois that are subject to 12 U.S.C. 1831a(j)(1). It covers other participants, including payment card networks and processors, only when they carry out functions that facilitate those institutions' powers affected by the interchange limit. It does not bar enforcement against state-chartered credit unions, savings associations or savings banks, or any Illinois-chartered financial institution. Permanent injunction, Dkt. 242, paragraph 1. The appeals were consolidated for expedited review on 16 October. Appeal docket. Ask your processor which institutions handle your payments. Ask a lawyer in Illinois how these orders and any later ruling affect you. Recheck before the law's start date.
States Where Surcharging is Generally Permitted
Check your own state or territory before switching on a surcharge. Permission can carry cost and disclosure conditions, and network rules still apply.
Implementation Requirements
Before Surcharging
- Confirm state law allows surcharging in all locations where you operate
- Determine your merchant discount rate (MDR) for applicable cards
- Check the network cap and state limit. Use the tighter applicable limit.
- Notify your acquirer for Visa at least 30 days before starting.
- Notify Mastercard and your acquirer at least 30 days before starting.
- Confirm setup and disclosures before the first surcharged payment.
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 publishes sample compliant signage at https://usa.visa.com/support/small-business/regulations-fees.html.
Sample In-Store Sign:
"We impose a [X]% surcharge on credit card transactions, no more than our cost of acceptance. We don't surcharge debit or prepaid cards."
Set [X] at or below the tighter network or state limit, such as 2% in Oklahoma. Don't copy a percentage without that check.
Sample Online Disclosure:
"A [X]% surcharge will be added to credit card transactions. This fee covers our cost of accepting credit cards. We never surcharge debit cards."
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 | Visa: acquirer notice; Mastercard: Mastercard and acquirer notice, at least 30 days ahead | Check provider setup requirements |
New York Implications (Feb 2024)
New York wants the full credit card price up front. Not a lower pre-surcharge subtotal. That breaks the usual model.
Common Approaches in NY:
- Use a cash-discount approach (list higher price, discount for cash)
- Show the full card price before payment and keep the surcharge as a separate receipt line where network rules require it
Convenience Fees
Convenience fees are not surcharges. Different rules apply.
Requirements
- Must cover a genuine alternate payment channel
- Flat fee, never a percentage
- The channel has to differ from how you normally get paid
- You can't charge one if cards are your only channel
- You can't charge one if you're 100% card-absent
Eligible Merchants
Convenience fees usually fit:
- 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 normally takes payment by mail or in person. It can charge a convenience fee for phone or online. They're genuine alternate channels.
A card-first retailer can't. There's no alternate channel to be convenient about.
Issuer Perspective
Issuers see surcharging in the cardholder base:
What you'll see:
- Cardholders steering away from the cards that get surcharged hardest
- More "hidden fee" complaints
- Some cardholders switching to debit, which can't be surcharged
What you can do:
Issuers can't stop a compliant surcharge. They 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
- Visa runs mystery shopping audits, so assume the signage gets checked
For Merchants
Documentation to Maintain:
- Your merchant discount rate (to prove the 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 | Visa: notify the acquirer; Mastercard: notify Mastercard and the acquirer, at least 30 days ahead |
| 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 whether surcharging is worth it at all? See Surcharging in Payments. It has the business case, the ROI math, and the implementation approach.
Just trying to cut processing costs? Check whether you're overpaying first. On flat-rate pricing (2.9% + $0.30), moving to interchange-plus often saves more. And it costs your customers nothing. Start with Understanding Your Costs and Buying Payments.
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
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