Are Credit Card Surcharges Legal?

A surcharge on a convenience store snack costs pennies. The same 3% on a $2,000 auto repair is $60, which is why the card networks cap these fees, require disclosure before you pay, and why four jurisdictions ban them outright. Credit card surcharges are legal in most of the country with limits, and with a receipt you can check.

Are credit card surcharges legal?

In most states, the answer is yes. When merchants charge a credit card surcharge, they must follow disclosure guidelines to make sure customers are aware of the charge beforehand. Card networks like Mastercard and Visa also set surcharge caps. Some states place even lower limits on what merchants can charge.

States where credit card surcharges are illegal

Four jurisdictions ban credit card surcharges today:

• Connecticut
• Maine
• Massachusetts
• Puerto Rico

A few other states still have surcharge bans sitting in their statute books, and whether those bans can be enforced is unsettled. Because this is where the law is most likely to have moved, confirm it for where you live rather than relying on a list. Find your state attorney general's consumer protection office to ask what applies where you live.

Read more >> What Are the Costs of Using a Credit Card?

Rules merchants must follow when adding surcharges

Disclosure requirements

If a merchant doesn’t have a surcharge but wants to add one, it will usually need to notify give its payment processor at least 30 days' noticei.

Card networks have strict disclosure requirements to make sure customers aren’t surprised by a surcharge at the last minute. Often, businesses must have surcharge notifications in the following places:

• At the point of entry of the business
• Wherever you pay, usually at the register
• On the checkout page before payment is finalized (for online orders)

If a customer is placing an order over the phone, the merchant will need to tell them about the fee before processing their payment.

Limits on surcharge amounts

Visa caps a surcharge at 3% of the transaction and Mastercard at 4%. In both cases, it's never more than what the merchant pays its processor to accept the card, whichever is lower.

Some states hold surcharges below what the networks allow. Colorado dropped its ban and replaced it with a cap. Since July 1, 2022, a merchant there can charge up to 2% of the transaction, or what it costs the merchant to process the card.

‍New York caps the surcharge at whatever the merchant's processor charges it, and requires the total credit card price to be posted. Minnesota caps it at 5%

Cards that cannot be surcharged

Credit card surcharges can only be applied to credit cards. Visa and Mastercard both bar them on debit cards and on prepaid cards, including most gift cards.

Separately, stores that accept SNAP can't charge EBT users more than anyone else. USDA rules bar retailers from charging SNAP recipients more than they charge cash customers, or applying different conditions to the sale.

Even if you pay with a debit card and select "credit" at the checkout terminal, your debit card still can't be surcharged. Visa and Mastercard both prohibit it, so a merchant that does it is breaking its agreement with the card network, which can result in fines or getting dropped by its payment processor altogether. Maine and Puerto Rico go further and ban debit surcharges by state law.

Read more >> How to Read a Credit Card Statement

Credit card surcharges vs. convenience fees

A surcharge applies only to credit card transactions, and it’s usually a percentage of the total transaction. A convenience fee is a flat fee that a merchant may charge for using a nonstandard payment method. For example, if a business prefers to accept online payments by debit card, credit card, or bank account, they might attach a $3 convenience fee to payments made by phone.

Notably, credit card networks typically won’t let merchants charge a customer both a convenience fee and a credit card surcharge in the same transaction.

Read more >> What Is the Fair Credit Billing Act?

What to do if you're charged a surcharge incorrectly

Businesses must display the exact dollar amount of a credit card surcharge as a separate line item on a receipt. What happens if you check the receipt and you’ve been charged too much?

Contact the merchant

Start with the merchant, with the receipt in front of you. Many merchants will refund it on the spot.

File a dispute with your bank or issuer

If the merchant doesn’t help, you can file a dispute with your bank or credit card issuer. You can often do this online and attach supporting documents. Make sure to include your receipt or other proof of the overcharge.

The deadline is tight, and it doesn't start when you spot the problem. Your issuer has to receive your notice within 60 days of the date it sent the statement showing the charge. If that statement is a few months old, the window may already have closed. But ask the merchant anyway, since a merchant can refund a fee at any time.

Bottom line

Credit card surcharges are legal in most of the country, capped at 3% on Visa and 4% on Mastercard, and they have to be disclosed before you pay and itemized on your receipt. If one shows up that wasn't disclosed, or it runs over the cap, start with the merchant.

One thing worth knowing if this pushes you toward your debit card: debit avoids the surcharge, but debit spending doesn't report to the credit bureaus, so months of it leave your credit file where it started. A Kikoff Credit Account does report on-time payments to Equifax, Experian, and TransUnion. Plans start at $5 a month, with no credit check to sign up.