Credit Card Surcharges (2024)

FAQs

What is the surcharge for using a credit card? ›

What is a credit card surcharge? A surcharge is an extra fee that a business or merchant adds to the price of a purchase when payment is made using a credit card instead of cash. The surcharge is often a percentage of the overall purchase cost and can range from 1% to 4%.

California Senate Bill 478, part of the Consumer Legal Remedies Act, bans all “junk fees” on purchases across California. This includes credit card surcharges in most situations.

The good news is that while the legality of surcharges has been murky in the past, as of 2023, credit card surcharges are now legal in all U.S. states except for Connecticut and Massachusetts. (Credit card surcharges are also prohibited in Puerto Rico, just in case you were wondering.)

Credit card surcharges are fees that a merchant adds to your total when you use a credit card for payment instead of other payment forms, such as a debit card, cash or check. Credit card surcharges are intended to help merchants cover the cost of processing your credit card transaction.

There are a few ways of legally passing on credit card fees to customers. Some are direct, and some are indirect. Adding a surcharge to cover the credit card fee is the more direct method while incentivizing cash payments is indirect.

You may accomplish this by including the credit card surcharge on your invoice or displaying a sign at your office. If you're using an online payment solution, this notice should be automatically included on your payment page.

The simplest way to avoid card surcharges? Pay cash. While businesses can charge a surcharge for paying with a credit, debit or prepaid card, they can't charge you more than the advertised price if you're paying in cash.

Every customer credit or debit card transaction costs your business money, as each purchase made by your customers via an EFTPOS terminal incur different fees from your bank/payment processors. To help cover these costs, many businesses opt to pass these expenses onto their customers with a credit card surcharge.

A surcharge is not a convenience fee. A convenience fee is levied by a merchant for offering customers the privilege of paying with an alternative non-standard payment method. Merchants can process convenience fees in all 50 states. A surcharge is levied by a merchant for customer purchases made with a credit card.

You can contact the seller directly to try to fix the issue, or you can “dispute the charge” with the company that issued your credit card. For example, you can dispute a charge that you did not authorize, that is for the wrong amount, or that is for something that the seller didn't provide as agreed upon.

What states don't allow credit card surcharges in 2024? ›

New York, New Jersey, Nevada, and South Dakota prohibit surcharges from exceeding the cost that the merchant pays to accept the card. Texas law prohibits surcharging but allows merchants to impose convenience fees, service fees, and cash discounts (and federal courts have previously ruled against Texas surcharge laws).

The short answer is no, it's not legal to surcharge debit card transactions. But let's delve deeper into why this is the case. Major card issuers, including Visa and Mastercard, expressly forbid surcharging debit card transactions. The legality of surcharges is further influenced by state laws.

Merchants can impose a surcharge as long as it doesn't exceed the cost of the merchant's processing fee. Merchants may offer discounts for payment by cash, check or other methods unrelated to credit cards. There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.

Merchant may charge a Visa and Mastercard surcharge of 3%. Based on Amex rules, requiring equal treatment across all Other Payment Products, a merchant would be out of compliance if they charged a surcharge on credit products only; therefore, merchant cannot surcharge Amex cards.

Businesses should clearly and conspicuously notify customers of any credit card surcharges both at the point of entry and at the point of sale. This means having signs or notices in visible locations that inform customers about the surcharge.

Credit card surcharges can't exceed the cost of accepting the card or four percent, whichever is the lower amount, even if it costs the business more than that amount to process your credit card payment. Convenience fees work similarly as they are meant to help a business cover processing costs.

The actual amount of interest you'll pay will depend on your specific card, but the typical annual percentage rate (APR) charged on credit cards is usually around 19%. This interest is the main cost associated with credit cards if you do not clear your balance each month.

If you surcharge each card's rate according to its exact fee (called dynamic surcharging), multiply that card's specific rate and multiply it by the order value. Note that this method results in the exact surcharge amount and recovers the most fees.