As credit card processing fees continue to rise, many business owners are looking for ways to offset costs. One common option is adding a credit card surcharge—a small fee passed on to customers who choose to pay with a credit card. But here’s the catch: surcharging isn’t legal or allowed in every state, and there are important rules you must follow to stay compliant.
At Beacon Payments, we help merchants understand their options and implement compliant pricing strategies. In this post, we’ll break down what a credit card surcharge is, how it works, and whether it’s legal in your state.
What Is a Credit Card Surcharge?
A credit card surcharge is an extra fee added to a sale when a customer chooses to pay with a credit card. This fee is meant to help businesses recover the processing costs associated with credit card payments—typically between 2% and 4%.
📌 Important: Surcharges only apply to credit cards—not debit or prepaid cards.
Credit Card Surcharge vs. Cash Discount
- A surcharge adds a fee to the sale after the price is displayed.
- A cash discount lists a higher card price and offers a discount when paying with cash.
Both programs can help offset processing fees, but they follow different legal and compliance rules.
Is It Legal to Add a Credit Card Surcharge?
Yes, but only in certain states—and you must follow card brand guidelines (Visa, Mastercard, etc.).
As of 2024, credit card surcharges are legal in most U.S. states, but there are a few exceptions and restrictions:
❌ States That Prohibit or Restrict Surcharging:
- Connecticut
- Massachusetts
- Puerto Rico
(Note: Laws and enforcement may change. Always check current state guidelines or ask Beacon Payments.)
In states where surcharges are allowed, you must follow these rules:
Rules for Adding a Surcharge
To stay compliant, merchants must:
- Notify the card brands (Visa, Mastercard, etc.) at least 30 days before implementing a surcharge
- Disclose the surcharge clearly at the point of entry, point of sale, and on receipts
- Only apply a surcharge to credit cards, not debit or prepaid cards
- Limit the surcharge to no more than 3%, or your actual processing cost—whichever is lower
- Display dual pricing clearly online and in-store
Non-compliance can lead to penalties or your merchant account being shut down.
Alternatives to Surcharging
If you're in a state where surcharging is prohibited—or want a smoother customer experience—consider:
✅ Cash Discounting (Dual Pricing)
This model lists the card price and offers a discount for cash. It’s compliant in all 50 states (when implemented properly) and achieves the same goal: offsetting processing fees.
At Beacon Payments, we offer fully compliant cash discount solutions with free signage, automated receipt formatting, and no added headaches.
Final Thoughts
Credit card surcharges can be a powerful way to control costs, but they must be handled carefully to stay within the law and card brand rules. If you’re considering surcharging—or looking for an alternative like cash discounting—Beacon Payments can help you do it the right way.
Contact us today to find out what’s legal in your state and get a custom plan to reduce your processing fees—without losing customers.