Is it Legal to Charge Customers a Credit Card Processing Fee?
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When using your credit card, some merchants may charge surcharges or require minimum purchase requirements.
Using a credit card over debit cards and cash can often be advantageous. With responsible credit habits, you can work toward building your credit score and even earn credit card rewards, such as points, miles or cash back.
However, some stores may charge you extra fees when using your credit card. There are three types of fees worth noting: surcharges, convenience fees and minimum purchase requirements. This guide will discuss the difference between each and if stores are legally allowed to implement them.
Credit card surcharges
Credit card surcharges are optional fees added by a merchant when customers use a credit card to pay at checkout. Surcharges are legal unless restricted by state law. Businesses that choose to add surcharges are required to follow protocols to ensure full transparency. The surcharge regulations outlined below only apply within the U.S.
Under Visa and Mastercard, retailers are required to register the surcharge with the payment network. Then, they must display a notice of the surcharge at the point of sale — both in-store and online. The consumer's receipt must also indicate a surcharge was added to the bill.
Surcharges cannot be imposed on debit cards or prepaid debit transactions per Visa and Mastercard.
If merchants add a surcharge, they must decide to add them at the brand or product level — but not both. A brand level surcharge adds the same fee to all credit card transactions from the same payment network, such as Visa or Mastercard. A product level surcharge applies to a particular type of Visa or Mastercard, such as Visa Signature or World Elite Mastercard. The maximum surcharge is 4% of the credit card transaction.
Credit card convenience fees
Credit card convenience fees can be charged in some instances and will vary by issuer. On Visa, these fees can be charged when a merchant offers an alternative payment method — one that's different from how it usually conducts business. Other issuers have varying rules that only allow official government agencies and select companies to charge convenience fees.
For example, a museum may not impose a convenience fee at the register if that's how most people buy their tickets. However, if the museum adds on an option to purchase tickets online with a Visa card, a convenience fee may be charged.
Here are the policies for convenience fees and how they vary by card network:
Network | Restrictions |
|---|---|
| Visa | Merchants can add convenience fees on all nonstandard payment methods, except for on income taxes in some states |
| Mastercard | Only select government agencies and educational institutions can charge credit card convenience fees |
| American Express | Only government agencies, educational institutions, utility companies and rental establishments can charge credit card convenience fees |
| Discover | Merchant cannot charge convenience fees to Discover cardholders unless it charges the same fees to credit cards from other card issuers |
States that prohibit credit card surcharges and convenience fees
Ten states prohibit credit card surcharges and convenience fees: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. It is illegal for merchants to add any surcharges to credit card transactions or charge convenience fees to nontraditional payment methods in these states.
Minimum purchase requirements
Minimum purchase amounts are thresholds merchants can impose on credit card transactions. This amount must be under $10. While not technically required, merchants who decide to add a minimum purchase requirement are encouraged to disclose this through proper signage and verbal communication to the cardholder.
Meanwhile, merchants cannot add a maximum transaction amount, except federal agencies or higher education institutions.
Why some stores don't take credit cards
Some merchants may choose not to accept credit cards to avoid paying processing fees. Depending on the card network, processing fees average around 2% of each purchase. Since these fees add up — especially for small businesses — they may decide not to accept credit cards altogether.
You'll sometimes find that merchants don't accept specific networks, such as Discover and American Express, as they tend to charge higher processing fees.
Should businesses impose credit card surcharges?
If the state where your business is located allows credit card surcharges, you should consider the pros and cons before imposing them. The main reason merchants add credit card surcharges is to compensate for high credit card processing costs.
Consumers generally frown upon extra fees, especially if you're one of the only businesses in your local area to charge fees. You should weigh that small profit against the potential profit loss from turning away some customers due to the surcharges.
ValuePenguin's verdict
Credit card surcharges, convenience fees and minimum purchase requirements are all fees that merchants can add to offset the cost of pricey processing fees. Keep in mind that surcharges and convenience fees are illegal in some states and can only be applied to credit card transactions.
Are there limits on credit card surcharges?
Yes. Merchants cannot charge more than 4% of each transaction.
Can you apply surcharges to debit cards?
No. Surcharges can be added to credit cards only.
Can varying surcharges be applied to different types of credit cards?
Yes. Merchants can apply varying surcharges by card brand or card product, but not both. For example, a retailer may impose surcharges only on American Express cards or only on certain products, such as Visa Signature cards.
Do merchants have to notify consumers of credit card surcharges?
Yes. Merchants must disclose any surcharges to consumers both at the point of sale and on the receipt.
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