Credit card processing fees—typically 2.9% + $0.30 per transaction—add up. Some businesses pass these fees to customers as a surcharge. But is it legal? Is it smart? Here's what you need to know.
Is Surcharging Legal?
In most U.S. states, yes. A 2013 class action settlement allowed merchants to add surcharges for credit card payments. However:
- Some states prohibit or restrict surcharging (check your state)
- Rules differ for credit vs. debit cards (debit surcharges are often prohibited)
- You must follow card network rules (Visa, Mastercard, etc.)
Important: This is general information, not legal advice. Check current regulations for your state and consult a professional if needed.
Card Network Rules
If you surcharge, you must follow card network requirements:
- Surcharge cannot exceed your actual processing cost (typically capped at 3%)
- Must clearly disclose the surcharge before the transaction
- Surcharge must appear on the receipt
- Same surcharge must apply to all credit cards (can't charge more for Amex)
- Cannot surcharge debit cards (even if run as credit)
Should You Surcharge?
Arguments For
- Cost recovery: You recover the processing fees
- Transparency: Customers see the true cost of payment methods
- Encourages alternatives: Some customers switch to lower-cost methods
Arguments Against
- Customer friction: Surcharges feel like hidden fees
- Competitive disadvantage: Competitors may not surcharge
- Complexity: Debit vs. credit detection isn't always reliable
Alternatives to Surcharging
Cash Discount
Instead of adding a fee for cards, offer a discount for cash/ACH. Psychologically, discounts feel better than surcharges—even if the net effect is similar.
Bake It Into Pricing
Raise your prices by 3% and include payment processing in your cost structure. Simpler, though you can't offer cash discounts.
Minimum Purchase Amounts
For small transactions where the $0.30 fixed fee hurts, require a minimum for card payments (up to $10 is generally allowed).
Implementing Surcharges
If you decide to surcharge:
- Check state law: Ensure surcharging is legal in your state
- Notify card networks: Visa and Mastercard require advance notice
- Set up disclosure: Post signage at point of sale, include in invoices
- Configure your system: Your billing software needs to calculate and add surcharges
- Train staff: Everyone should be able to explain the surcharge
Using Conto for Surcharges
Conto Billing includes built-in surcharge support. Set your percentage, and it's automatically applied to credit card payments. The surcharge appears clearly on invoices and in the customer's payment flow.