What states do not allow credit card surcharges?

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

Before even targeting to read the guidelines for various card associations regarding surcharges and its applications, kindly check in the laws relating to the same matter in your state. Yes, we’re talking about the state. There are some states, precisely 10 in number that do not allow credit card surcharges within the state premises. The list of the states includes*:

  •    Oklahoma
  •    Maine
  •    California
  •    Texas
  •    Colorado
  •    Connecticut
  •    Kansas
  •    New York
  •    Massachusetts
  •    Florida

The state and federal laws of these states prohibit this practice because these states found that it’s unfair to charge the money from the customers using a credit card. Following this practice will imply, that using a credit card is a punishment for the people that come with a charge following the chain. Also, it will not only hamper the idea of using plastic money but demoralize the use of credit card.

So, if you’re running a business in any of these states, then beware of the fact that surcharging is illegal in these states. And, a merchant is strictly prohibited from charging money beyond the purchase price. However, the merchants can provide a discount to the people paying via cash or cheque. Isn’t it strange yet amazing?

Whereas, the surcharging system is very much prevalent in states other than the ones listed above. One cannot charge the additional surcharge on any other payment mode other than credit card.  Specifically, debits cards and the prepaid card do not come under surcharging criterion.

* Source

Credit Card Surcharging

  •  At times, credit card surcharge may portray as a nuisance and annoying thing for the customer.
  • Credit card surcharging refers to an additional amount added to the topmost of a payment receipt.
  • Credit card surcharging is mainly done to cover the cost of processing a credit card on each transaction done by a customer.
  • But, there is always a reason for this additional charge, i.e., to cover the costs.

Expanding credit card surcharges and its applications

  • Credit cards are a luxury convenience. It is very convenient to carry, handle and just swipe the card anywhere, anytime. The ease of using this plastic money without any fear of shortage makes it much more happening to use. Plus, the added benefits that a customer gets on the purchase of a credit card are something very luring for every commoner.
  • The ease of using a credit card may not cost you anything, but it does impose a burden on the merchants.
  • Every time you swipe your credit card, the merchant you’re merchandising with pays your processing fee to the credit card processors.
  • This expense is typically the 4% of each transaction done via credit card.
  • For the merchant’s point of view, this expense costs a lot and hampers the profits of a business. As a result of this situation, a merchant passes on this charge by including a credit card surcharge on every transaction made by a customer using a credit card.
  • It is like an extra fee that was earlier borne by the merchants. But in the current scenario, it is transferred to the purchase receipts of a customer paying via credit card.

Frequently asked questions

Surcharges are rarely imposed by big retailers, but they are very sensitive to the small and low-ticket retailers. This is because card processing fee is borne by the small retailers accumulates to a more significant amount and hampers the growth of the business, making it financially unstable.  


Retailers or merchants are supposed to add a surcharge equivalent to the charge of processing a credit card per transaction. By the credit card companies, the surcharges are maximum up to 4% of the transaction.

You must have heard about the convenience fee that is also charged due to a credit card transaction. But, surcharging and convenience fee are different. Let’s determine how!

Surcharging is a charge that is implied to recover the cost of card processing.  A surcharge is a fee that covers the cost of a card transaction. Whereas, the convenience fee is primarily charged because of card acceptance as a method of payment.

For many places, merchants are allowed to levy a surcharge fee. If they are not allowed to do so, it may be because of the agreement and terms of contract with their credit card processing companies.

Well, by the amendment in the Dodd-Frank reform and Consumer protection act, the merchants are allowed to deduct the surcharging fee on the transactions made using credit cards.

Notifying is important!

Merchants have the flexibility of adding surcharges whenever they wish to, as per the guideline by the state and federal laws. However, they have to be cautious about notifying people about the implication of surcharging fee using signage and separated clause mentioned in the purchase bills of the customers.

The credit card companies and card processors are deducting a 4% of the transaction as their surcharging fee. Whereas some of the merchants are charging a flat amount of $0.35 on every transaction made using credit cards. If you’re transacting for a lesser amount, then the flat charge is much higher as a percentage of your purchase.

  •    In such situations, you can report the merchants to the credit card processing firms, and notify them about the required percentage to be charged for the surcharging fee.
  •    These rules and guidelines have to be considered well before implying as well as paying the surcharging fee.
  •    Visa and MasterCard being the credit card companies have their own set of guidelines in regards to surcharging.  
  •    In case you find surcharging overrated and a problem for the customers, you can directly contact the credit card companies regarding the same.