Can a business charge a credit card fee?

If you regularly use a card at checkout, you may have encountered an added service fee for paying with your card. While businesses were not allowed to charge fees for paying with plastic in the past, updated rules allow companies to add a surcharge or fee when customers use a card for payment.

Keep reading to learn how businesses can charge extra when using a credit card.

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What are credit card processing fees?

Businesses must pay a modest credit card processing fee whenever a customer makes a card-based payment. Fees are often around 1% to 3% of the transaction amount, which merchants pay to their credit card processor. So, for example, when you make a $100 purchase at a local restaurant or store, the seller only gets about $97 to $99, with the remainder going to credit card processing fees.

Fees are divided between the card network (Visa, Mastercard, American Express and Discover, for example), the merchant’s processor (such as Square, Stripe, PayPal and major banks) and potentially other companies involved in transaction processing.

Understanding surcharges vs. convenience fees

You may come across convenience fees and surcharges when shopping online or in person. While it’s never fun to pay extra, understanding how these fees work may help you avoid or better control them.

Convenience fees are add-on charges related to extra services. For example, if you buy a movie ticket online or by phone through a third-party service, the third party can charge a convenience fee. If you’ve bought concert tickets through a service like Ticketmaster, you’re likely very familiar with convenience fees. If a business normally accepts cash payments, they may add a convenience fee for credit card sales.

Surcharges are add-on charges that help companies to recoup the higher cost of a credit card transaction. If a business adds a surcharge to credit card payments, it’s to offset the 1% to 3% fee they’re likely paying for credit card processing.

Note: In place of surcharges, some businesses require a certain minimum purchase amount for card-based payments to ensure they earn enough to cover the added costs.

How much are typical credit card transaction fees?

When you go to the register in most states, you shouldn’t be shocked to see a surcharge added to your purchase. Surcharges vary based on the location and merchant.

Before 2013, surcharges were generally nonexistent. After a class action lawsuit against Visa and Mastercard, businesses won the right to mark up card-based purchases to help cover their added costs. Surcharges may be up to 4% of the purchase at most but are often around 2% to 3%, in line with the seller’s processing fees.

At gas stations, you may have noticed some sellers mark up purchases by $0.05 or $0.10 per gallon when paying by card. They may call the cash price a discount, but regardless, you’ll pay more at some gas stations when paying with a credit card because of the surcharge.

State or local governments may regulate credit card transaction fees. We’ll break down which states allow surcharges and which prohibit or limit them below.

Are credit card fees legal? 

Credit card surcharges are legal unless otherwise prohibited by state or local law. Certain states have specific disclosure requirements, while others limit what businesses can add as a credit card surcharge.

While laws can change at any time, only 10 states currently impose some type of restriction or disclosure requirement on credit card surcharges. Connecticut, Maine, Massachusetts and Oklahoma prohibit or limit surcharges.

Credit card surcharge legality across the U.S.

Federal court cases regarding surcharge legality may override state laws in some situations. Here’s a glance at states with laws that restrict or prohibit card surcharges.

STATE	LEGAL RESTRICTIONS RELATED TO CREDIT CARD SURCHARGES	RESTRICTION DETAILS
Alabama	No restriction
Alaska	No restriction
Arizona	No restriction
Arkansas	No restriction
California	Restricted	Illegal according to state law but reversed by court case
Colorado	Restricted	Surcharges are limited to 2% or the actual cost
Connecticut	Restricted	Surcharges are prohibited. Cash discounts are allowed
Delaware	No restriction
District of Columbia	No restriction
Florida	Restricted	Convenience fees allowed up to the cost incurred by the seller
Georgia	Restricted	Convenience fees are only allowed when alternate payment methods are available without a fee. Fees must be clearly disclosed. Fees can’t be more than the merchant’s cost
Hawaii	No restriction
Idaho	No restriction
Illinois	No restriction
Indiana	No restriction
Iowa	No restriction
Kansas	Restricted	Surcharges are limited by state law
Kentucky	No restriction
Louisiana	No restriction
Maine	Restricted	Surcharges are prohibited, except in the case of government entities, which must clearly disclose the amount prior to payment and cannot exceed the cost incurred by the government for the transaction
Maryland	No restriction
Massachusetts	Restricted	Surcharges are prohibited
Michigan	No restriction
Minnesota	Restricted	Surcharges must be clearly disclosed and may not exceed five percent of the purchase price
Mississippi	No restriction
Missouri	No restriction
Montana	No restriction
Nebraska	No restriction
Nevada	No restriction
New Hampshire	No restriction
New Jersey	No restriction
New Mexico	No restriction
New York	Restricted	Cash and card prices may be used if clearly disclosed
North Carolina	No restriction
North Dakota	No restriction
Ohio	No restriction
Oklahoma	Restricted	Surcharges limited to 2%. Disclosures are required
Oregon	No restriction
Pennsylvania	No restriction
Puerto Rico	Restricted	Surcharges are not permitted
Rhode Island	No restriction
South Carolina	No restriction
South Dakota	No restriction
Tennessee	No restriction
Texas	Restricted	Only government entities are allowed to add surcharges
Utah	No restriction
Vermont	No restriction
Virginia	No restriction
Washington	No restriction
West Virginia	No restriction
Wisconsin	No restriction
Wyoming	No restriction

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Credit card fee rules and regulations

If you run a small business and want to set credit card surcharges, it’s important to take several steps. Those include:

• Research state laws and regulations.
• Check rules and limitations with your credit card processor.
• Notify the processor of planned surcharges if required.
• Create signage or disclosures notifying customers if required by state law.
• Train employees to disclose surcharges orally if required by state law.

Do payment processors handle surcharges?

Check with your payment processor to learn more about how surcharges work. In some cases, you need to add the surcharges in your sales or credit card processing systems. In others, you may have to work with the processor to have them adjust your sales to include the surcharge.

Check out our list of the best payment processing companies to learn what to expect when working with different credit and debit card processors.

Featured credit card processing offers

Stax

Learn More

Via Stax’s website

Monthly fee

$99

Swiped transaction fee

7¢ to 10¢ + interchange rate

Merchant One

Learn More

Via Merchant One’s website

Monthly fee

$13.95

Swiped transaction fee

0.29% to 1.55% per transaction

Payment Depot

Learn More

Via Payment Depot’s webiste

Free Trial

No

Offers

$0 Setup & No Cancellation Fees

Pricing

Customized Interchange+ Pricing – Rates as low as 0.2% – 1.95%

Clover

Learn More

Via Clover’s website

Monthly fee

$14.95

Swiped transaction fee

2.6% + 10¢

Frequently asked questions (FAQs)