Is It Illegal to Charge Credit Card Fees in Business Transactions

In business transactions, charging credit card fees can be a complex issue. It's not entirely illegal, but there are restrictions and regulations to be aware of.

The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 prohibits merchants from charging excessive or surprise fees to consumers. This means that businesses can't slap on arbitrary fees without warning their customers.

Some credit card companies, like Discover, don't charge merchants any fees for transactions. This is a win-win for businesses and consumers alike.

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Surcharges are optional fees that merchants charge customers who use a credit card to pay at checkout.

They are legal unless restricted by state law and are limited to 4% of the total transaction.

Businesses that add surcharges are required to follow protocols to ensure that consumers are aware of the charges before they pay.

In other words, merchants must clearly disclose the surcharge to customers before they make a purchase.

Credit card surcharges are governed by state law, with each state having its own rules and regulations. As of December 2023, surcharging is legal in all but four states (Connecticut, Maine, Massachusetts, and New York*) and Puerto Rico.

The only states that currently prohibit credit card surcharges are Connecticut, Maine, Massachusetts, and Oklahoma. A recent ruling in Colorado limits merchants to a maximum surcharge of 2%.

Merchants must disclose the surcharge clearly before the transaction, and the amount of the surcharge must appear on the cardholder's receipt. This is a requirement issued by the Visa and MasterCard payment networks.

The amount of the surcharge cannot exceed the merchant's actual cost of accepting credit cards, which is typically between 1.5% and 3%. Merchants may impose surcharges on credit cards where permitted by law, but not on debit cards.

Here is a list of states where credit card surcharges are prohibited or restricted:

Merchants can add flat convenience fees on any nonstandard payment methods with a Visa card.

Convenience fees and surcharges are two kinds of fees that a business can charge, but they're often misunderstood.

In most states, merchant fees are legal as long as the business follows the necessary protocols.

The credit card network that processes the payment will charge a merchant fee whenever a merchant accepts a credit card payment.

Merchants are expected to cover this fee, which can add up quickly.

Businesses that can charge convenience fees and surcharges include gas stations and select government agencies and educational institutions.

Here's a breakdown of convenience fee policies by card network:

Businesses can charge credit card fees, but there are protocols to follow. In most states, merchant fees are legal as long as the business follows the necessary protocols.

Convenience fees and surcharges are two kinds of fees that a business can charge. Convenience fees usually range between two and three percent of the purchase price, while surcharges can't exceed the cost of accepting the card or 4 percent, whichever is the lower amount.

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Some merchants may choose not to accept credit cards to avoid paying processing fees, which average around 1% to 3% of each transaction. Merchants can't impose surcharges on debit cards or prepaid debit transactions per Visa and Mastercard.

Here are the different types of surcharges:

The maximum surcharge is 4% of the credit card transaction.

Businesses can charge a fee for using a credit card, but there are protocols to follow. They must notify the credit card associations and clearly disclose the fee.

The maximum credit card surcharge is 4% of the transaction, or the cost of accepting the card, whichever is lower. Businesses can't charge more than this amount, even if it costs them more to process the payment.

Convenience fees work similarly, and usually range between 2 and 3% of the purchase price. They're meant to help businesses cover processing costs.

Businesses must clearly communicate convenience fees at the point of sale. If there's another preferred form of payment, a convenience fee can only be imposed.

You can check the table below to see how convenience fees vary by card network:

Businesses can charge credit card transaction fees, but they must follow specific protocols. Merchant fees are legal in most states, but not all states allow surcharges.

Convenience fees can be charged when a customer uses a nonstandard payment method, such as paying by phone. For example, a business that typically accepts online payments may offer the option to pay by phone for a fee.

According to Visa, merchants can add flat convenience fees on any nonstandard payment methods. Mastercard, on the other hand, only allows select government agencies and educational institutions to charge credit card convenience fees.

Convenience fees are meant to help businesses cover processing costs, and they usually range between two and three percent of the purchase price. Businesses must clearly communicate convenience fees at the point of sale.

Businesses can also charge surcharges, but there are restrictions. For example, a surcharge cannot exceed the cost of accepting the card or 4 percent, whichever is the lower amount.

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Some states prohibit or restrict credit card surcharges. For instance, Connecticut, Massachusetts, Maine, and Oklahoma currently prohibit surcharges, while a recent ruling in Colorado limits merchants to a maximum surcharge of 2%.

Merchants must display a notice of the surcharge at the point of sale and include it on the consumer's receipt. They can't impose surcharges on debit cards or prepaid debit transactions.

Here are the states that currently prohibit or restrict credit card surcharges:

In most U.S. states, adding convenience fees to credit card transactions is legal. However, there are still rules businesses must follow when doing so.

Businesses can choose to take responsibility for merchant fees by incorporating them into their pricing, but some pass these fees directly to consumers in the form of convenience fees and surcharges.

Adding convenience fees to credit card transactions can be common, but it's essential to be aware of the rules in your area to avoid overcharging.

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You can ensure you're not overcharged by learning about the convenience fee rules that affect your area.

Convenience fees are legal in the majority of the U.S., but the specifics depend on local laws and the parameters provided by payment processing networks.

If you're unsure about the rules in your area, being familiar with the restrictions is crucial to protect yourself from overcharging.

Here's a summary of key points to keep in mind:

Merchants can add flat convenience fees on any nonstandard payment methods with Visa.

Credit card surcharges are generally allowed in most states, but there are some exceptions. If you live in one of the states where surcharges are prohibited, you're in luck – you won't have to pay extra fees.

Merchants may impose surcharges on credit cards where permitted by law, but not on debit cards.

The only states that currently prohibit surcharges are Connecticut, Massachusetts, Maine, and Oklahoma.

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A recent ruling limits merchants in Colorado to a maximum surcharge of 2%.

Here's a quick rundown of the card networks' policies on convenience fees:

Consumers generally frown upon extra fees, and 57% of cardholders think that fees for credit card processing should be illegal.

Merchants are required to display a notice of the surcharge at the point of sale, both in-store and online. This notice must be clearly visible to consumers.

The receipt must also include the surcharge amount. This is a requirement set by Visa and Mastercard.

Merchants can't impose surcharges on debit cards or prepaid debit transactions. This is a clear rule set by Visa and Mastercard.

Merchants must decide whether to add a surcharge at the brand or product level. They can't do both.

Here's a breakdown of the two options:

The maximum surcharge allowed is 4% of the credit card transaction. This is the limit set by Visa and Mastercard.