Should Your Business Surcharge?

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By now, many businesses have heard that surcharging, or adding a fee to transactions when customers use a credit card, is allowed except where prohibited by law. But is it a good idea? In this article, we’ll tackle the pros and cons of surcharging to help you decide if it’s right for your business.

The Charging Customers a Fee to Use Credit Cards infographic summarizes main points about surcharging for quick reference.

First, State Laws

There are nine states that prohibit surcharging: Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. However, some states – like New York – are dealing with legal challenges to the ban, and it could change. Businesses in New York took their case to the Supreme Court early in 2017, arguing that prohibiting surcharges infringes on their free speech. While the Supreme Court noted that the ban may impact free speech, they did not make a further ruling and sent the case back to lower courts for review.Additionally, California is in the midst of its own battle. The state prohibits surcharging, but the courts ruled it unconstitutional. The California Attorney General appealed that ruling, but final decisions have not been made. In the interim, the state cannot enforce the surcharge ban.

Rules and Requirements

In states where surcharging is permitted, your business must follow Visa and Mastercard’s surcharge rules. That includes notifying customers of the surcharge with signage at points of entry and points of sale, listing the fee as a separate line item on receipts, notifying the card brands of your intent to surcharge in advance, and capping the surcharge at your cost of processing or 4%, whichever is lower.Note that you cannot surcharge debit cards, even when “run as credit.”Failure to abide by the rules set forth by the card brands can result in termination of your merchant account.

Consumer Opinion and Determining if You Should Surcharge

Overall, as seen in the research in the infographic, consumers don’t like the idea of surcharges. When considering whether or not you should add a surcharge, think about your customer base and if they have easy alternatives and how many credit card transactions you actually take.

Factors to consider:

• Are you in a highly competitive industry or location?

• Are your competitors surcharging?

• Do you take a lot of debit cards, which can’t be surcharged?

If the answer to any of these questions is “yes” you may want to consider alternatives to surcharging. If your customers have lots of options and your competitors aren’t surcharging, it can provide an additional incentive for customers to leave your store to go elsewhere.If you have high debit usage among your clientele, surcharging isn’t likely to help defray your costs much, as debit cards still incur processing fees and cannot be surcharged even when “run as credit” or without a PIN.


Instead of adding a fee for credit card transactions, you can encourage customers to use cash by offering a cash discount. This is permitted even in states where surcharging is banned. Set all your prices as if customers will pay with cards, and then if they choose cash, offer a discount. It’s a win-win: customers won’t feel like they’re being punished if they choose to use a card and forego a discount, and your pricing will accurately account for the cost of processing cards.

Additionally, make sure that you have a competitive processing solution so you’re not overpaying to take cards in the first place.

Ellen Cunningham is the marketing manager for CardFellow, a leading resource for accurate information in the credit card processing industry. She writes about all aspects of credit card acceptance and enjoys helping businesses find the right solution for their needs.