A guide to credit card surcharges

A credit card surcharge program can be particularly beneficial for small businesses to offset the cost of accepting credit card payments. However, before implementing it, you must know all the state, federal, and card network rules surrounding it.

A credit card surcharge is a fee that a business adds to a customer's transaction when they pay with a credit card. The purpose of the surcharge is to cover the costs that the business incurs for processing credit card payments.

Surcharges are usually a percentage of the transaction amount. For example, a business might add a 2% surcharge to a purchase.

Surcharges are legal in most of the United States, however regulations vary by country and state. Currently, credit card surcharging is illegal in the following states and territories:

• Connecticut
• Maine
• Massachusetts
• New York
• Puerto Rico

Some nationwide rules that apply to surcharging are:

• The surcharge rate can never exceed 4% of the total credit card transaction (3% for Visa cards).
• Businesses must follow guidelines set by card networks such as American Express and Mastercard. These networks may have differing guidelines for informing customers about surcharges and surcharge rates.
• Businesses with a credit card surcharge program must inform their customers (both online and in-store) about the program. Before making a payment, customers should know they are liable to pay a surcharge if they choose to pay with their credit cards.
• Surcharges can only be applied to recoup some or all of the costs of allowing credit card purchases. Businesses cannot use surcharging to earn a profit.
• Surcharging does not apply to debit cards even if they are used as credit cards.
• The surcharge has to be a percentage of the total transaction and cannot be an arbitrary amount set by a business.
• The surcharge has to be listed clearly in the receipt so that customers know exactly how much they paid.

• Illinois – Surcharge rates are capped at 1% or the total processing fee—whichever is lower.
• Colorado – The maximum surcharge that a merchant can charge here is 2% of the transaction amount.
• Georgia – Convenience or swipe fees are allowed in this state but businesses must provide customers with alternate payment options.
• Kansas – The Federal Court recently overturned anti-surcharging laws existing in the state for decades. If a merchant is to implement a credit card surcharge program, they must incorporate credit card fees into the listed price of products.
• Texas – Surcharging, per se, isn’t allowed in Texas but businesses can charge service fees, convenience fees, and offer cash discounts.
• Nevada, New York, South Dakota, New Jersey – In these four states, the surcharge rate cannot be more than what businesses are paying out in processing fees to accept credit card payments.
• Minnesota – Businesses are advised to keep an eye out for new changes in surcharging laws in this state effective from Jan. 1, 2025. As of now, credit card surcharging is legal here but certain surcharges could be banned in the near future.
• California – A bill recently signed by Governor Gavin Newsom has once again prohibited surcharging in this state. The law became effective on July 1, 2024. Businesses must now include credit card fees in the listed price of products. Non-compliance can result in a $1000 fine.

• Florida – Merchants in Florida are in a unique situation because while state law bans surcharging, it isn’t enforceable. Federal courts have deemed this ban to be unconstitutional. To impose surcharges, businesses must follow these rules:

  1. Customers should be informed of the surcharge program.

  2. The surcharge should be listed as a separate line item in receipts.

  3. The surcharge rate cannot exceed credit card processing fees.

  4. Debit card transactions are exempt from surcharging.

  5. Surcharges must be registered by the business.

• Oklahoma – The situation in Oklahoma is similar to that of Florida. The law prohibits surcharging customers who pay by credit cards. However, Federal courts have declared this to be unconstitutional. Hence, merchants in Oklahoma can set up surcharging programs as long as they follow card networks and country-wide rules.
• Michigan – Credit card surcharging is legal here but there are strict rules regarding informing customers. Brick-and-mortar stores have to install signage at every point of sale (POS) and entrances that explain surcharge fees to customers. In the case of gas stations, if prices differ for cash versus card payments, they must use similar signs to post both these prices.
• Montana – The surcharge rate is capped at 3%.

Businesses must notify their bank and the credit card companies in writing at least 30 days before applying a surcharge. Surcharges must also be clearly disclosed to the customer before payment.

You can learn more about surcharges here: https://stripe.com/en-sg/resources/more/credit-card-surcharges-explained-what-businesses-need-to-know

We are in the process of building a feature for surcharges that will be available for Candid merchants that use Finix as their payment processor. We expect this feature to be completed by December of 2024. For Stripe users, the surcharge feature will potentially be available sometime in early 2025. If you are interested in being notified when the surcharge feature becomes available please contact our support team at team@candidwholesale.com.

*While the information provided here is current at the time of this writing, we strongly encourage merchants to check the current rules and regulations in their own state or country for the most up to date information. Please note that Candid only provides this information as a courtesy and not as business or legal advice.