Is It Legal to Charge Customers a Credit Card Processing Fee?

Is it time to save money on your merchant services?

As businesses continue to look for ways to reduce costs, many wonder: Can I charge customers a fee for using a credit card? The answer, however, depends on where you operate and how you implement it. While some U.S. states allow surcharges, others restrict or regulate them. Therefore, this guide breaks down Credit Card Surcharge Compliance and Alternatives, covering the legalities, best practices, and alternative solutions for businesses considering credit card processing fees.

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Understanding Credit Card Processing Fees

Every time a customer swipes, taps, or enters their credit card details, the merchant pays a processing fee—typically ranging from 1.5% to 3.5% of the transaction. These fees include:

• Interchange fees (paid to the card-issuing bank)
• Assessment fees (paid to the card network, like Visa or Mastercard)
• Payment processor fees (charged by the merchant services provider)

To offset these costs, some businesses pass the fee onto customers. But is that legal? To navigate this question effectively, businesses must understand Credit Card Surcharge Compliance and Alternatives to make informed decisions.

Is It Legal to Charge a Credit Card Surcharge?

The legality of credit card surcharges varies by state. While federal law allows businesses to impose these fees, it’s important to note that some states ban or regulate them.

U.S. Regulations on Credit Card Surcharges

🔹 States That Prohibit Credit Card Surcharges (As of 2025): Connecticut, Maine, Massachusetts

🔹 States That Regulate Credit Card Surcharges (Requiring Disclosure & Compliance): California, Colorado, Florida, New York, Texas

🔹 States That Allow Credit Card Surcharges Without Major Restrictions: Most other U.S. states allow businesses to charge a credit card processing fee, provided they follow disclosure requirements.

Understanding these regulations is a crucial part of Credit Card Surcharge Compliance and Alternatives, ensuring businesses avoid legal complications.

Rules for Charging Credit Card Surcharges Legally

If you operate in a state where surcharges are allowed, you must follow these rules to remain compliant:

1. Notify Credit Card Companies – Visa, Mastercard, and American Express require merchants to register surcharges with them at least 30 days in advance.
2. Transparent Customer Disclosure – You must clearly disclose the surcharge before checkout (e.g., at the register, on receipts, or on the payment page).
3. Surcharge Limits – You cannot charge more than what you pay in processing fees (typically capped at 3% to 4%).
4. No Surcharges on Debit Cards – U.S. law prohibits surcharges on debit card transactions, even if the customer runs the debit card as “credit.”
5. Clear Billing Statement – The surcharge must appear as a separate line item on the receipt.

Since surcharges can be difficult to understand in a face-to-face business setting, they tend to work better when customers pay through links. Additionally, dual pricing often proves to be easier for employees and customers to understand. These approaches align well with Credit Card Surcharge Compliance and Alternatives, ensuring clarity and simplicity.

Alternatives to Credit Card Surcharges

If you’re operating in a state that bans credit card fees—or if you want to avoid customer backlash—consider these alternatives:

✅ Cash Discount or Dual Pricing Programs – Offer a lower price to customers who pay with cash instead of adding a fee for credit card transactions.

✅ Minimum Purchase Requirements – Require a minimum purchase (up to $10 per transaction) for credit card payments, in accordance with Federal Reserve rules.

✅ Price Adjustment Strategy – Adjust your overall pricing to include processing fees rather than charging a visible surcharge.

✅ Encourage ACH Payments – For invoicing or B2B transactions, ACH payments are a great alternative. This can also be implemented using payment links!

These options provide valuable insights into Credit Card Surcharge Compliance and Alternatives, helping businesses tailor their strategies to suit their needs.

Pros and Cons of Charging Credit Card Fees

Pros:

• Offsets payment processing costs

• Encourages cash payments

• Increases profit margins

• Helps small businesses maintain pricing

Cons:

• May discourage customers from using credit cards

• Must follow strict legal compliance

• Potentially negative customer perception

• Some states prohibit or regulate surcharges

Final Thoughts: Should You Charge a Credit Card Surcharge?

If legally allowed in your state, credit card surcharges can help businesses recover processing fees. However, it is crucial to follow state laws, credit card network rules, and transparency guidelines to avoid fines and legal issues.

For businesses seeking a more customer-friendly approach, cash discount programs or strategic pricing adjustments may be better alternatives.

Understanding Credit Card Surcharge Compliance and Alternatives ensures that businesses can make informed decisions while keeping customers satisfied.

FAQ: Frequently Asked Questions