Can You Surcharge on Credit Card Purchases?

Many merchants surcharge customers paying with card- or require a minimum purchase amount- to make up for processing fees. If you’re wondering whether this is legal, the answer is yes, in some states. 

Many merchants surcharge customers paying with card- or require a minimum purchase amount- to make up for processing fees. If you’re wondering whether this is legal, the answer is yes, in some states. 

Merchants won the right to surcharge- or add “checkout” fees- after a class action lawsuit against card issuers and banks in 2013. But most merchants were (and continue to be) slow to adopt credit card surcharges. Three potential explanations are:

  1. Some merchants, like many consumers, may not know they can charge extra.
  2. Merchants are hesitant to annoy customers or create the perception that they’re nickel-and-diming customers.
  3. Surcharging in some industries might be more complicated than it's worth. For example, when accepting payments from clients who use health insurance, a surcharge could be problematic.

While it’s legal under federal law to add a surcharge to credit card transactions, some states prohibit the practice. Ten states already had laws on the books before 2013. Now that merchants can officially use surcharges, other states are considering outlawing the practice as well. These states include California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. 

Merchant Restrictions

  • Merchants must clearly disclose the fact that there is a surcharge to you before any transaction.
  • Your receipt must show the credit card surcharge.
  • The surcharge can’t exceed the amount the retailer pays or 4% (you pay the lesser of these two, typically 2% to 3%).

Surcharges and minimum purchase requirements are only for credit card purchases, not debit card transactions. That’s still the case if you sign for a debit card transaction instead of using your PIN (and it’s processed as a “credit” transaction).

It is also possible to only surcharge certain cards and not others. For example, if you chose to only surcharge on Visa, you must surcharge Visa on the same terms and conditions as any equal or higher cost competitor that imposes limits on surcharging. 

While surcharging- if legal in your state- is an option, it is a last resort; customers are dissuaded from purchasing your product if they’re charged extra for using a card. It would be beneficial for you to exhaust all options in terms of analyzing your credit card processing statements to see where you can lower fees. Luckily, SwipeSum is a team of expert payment consultants that created an AI-powered software called Staitment, which instantly analyzes processing statements and recognizes where you could save money. 

Izzy Gillman

Izzy is a rising senior at Washington University in St. Louis studying Creative Writing and Psychology. She has been working as a Content Marketing Intern at Swipesum since June of 2020. In her free time, she enjoys journaling, running, and reading memoirs.

Read more
SCHEDULE a CONSULTATION

Meet someone from our partnerships team to see if working together makes sense.

We will schedule a quick consultation call to go over how you're currently handling merchant services at your bank, show you our menu of options, and plan for a successful launch.

Swipesum.Insights

SWIPESUM.CONSULTING

We help businesses make intelligent payment decisions.

Learn more about Swipesum
audit

Start with a free audit of your payments processing statements

Schedule an audit
consultation

Connect with a payments expert and get a free initial consultation

Book consultation