With the rise in payment processing costs, many merchants are exploring credit card surcharging as a way to offset expenses. While surcharging can reduce costs, it’s important to know the rules and requirements to avoid penalties and maintain customer trust. Here’s what every business owner should know about the latest credit card surcharging regulations and how to implement them properly.

What Is Credit Card Surcharging?

Credit card surcharging is when a business adds a fee to a customer’s transaction if they choose to pay with a credit card. This fee is meant to cover the processing costs that merchants pay to accept credit card transactions.

For example:

  • A $100 purchase with a 3% surcharge means the customer pays $103 if they use a credit card.
  • If the customer pays with cash or debit, they pay $100.

Key Surcharging Rules Merchants Must Follow

  1. State Laws Apply
    Not every state allows surcharging. Merchants should confirm whether it’s legal in their state before adding fees.
  2. Disclosure Requirements
    You must notify both your customers and your processor. Card networks like Visa and Mastercard require advance notice before you begin surcharging.
  3. Fee Limits
    The surcharge cannot exceed 3% or the actual cost of processing (whichever is lower).
  4. No Debit or Prepaid Cards
    Surcharges can only be applied to credit card transactions—not debit or prepaid cards.

  5. Dual Pricing vs. Surcharging
    With dual pricing, merchants display two prices:

    • The cash/debit price
    • The credit price (which includes the processing cost)

    Importantly: the higher credit card price must always be displayed. Merchants cannot advertise the lower cash price only and then add fees at checkout. Transparency is critical to staying compliant.

Risks of Non-Compliance

Failing to follow the rules can lead to:

  • Fines from card networks
  • Customer complaints or chargebacks
  • State-level penalties in regions where surcharging is restricted

Best Practices for Implementation

  • Upgrade your POS System: Use technology that supports surcharging or dual pricing automatically.
  • Be Transparent: Post clear signage at the register and online checkout.
  • Train Staff: Make sure employees can explain the difference between surcharging and dual pricing to customers.
  • Consider Customer Impact: While surcharging saves you money, it may frustrate some customers. Dual pricing can often be a better approach, as it frames cash payments as a discount rather than credit cards as a penalty.

Final Thoughts

Surcharging can be a smart way to reduce credit card processing costs—but only if done correctly. The key is compliance and transparency, especially with dual pricing where the higher credit price must always be displayed.

At Beacon Payments, we work with merchants to design surcharging and dual pricing programs that meet state and card network rules while helping you save money.

Contact us today to learn how to set up compliant programs that protect your business and keep your customers informed.