Credit Card Surcharge Rules by State: Complete 2026 Guide

Credit card surcharging lets merchants add a fee to credit card transactions to offset processing costs. Since the landmark 2013 class-action settlement between merchants and the card networks, surcharging has been legal in most of the United States. But "most" is not "all," and even in states where it is legal, there are strict rules you need to follow.

This guide covers the current status of surcharging laws in every state, the Visa and Mastercard compliance requirements, and the exact steps to implement surcharging without getting fined or losing your merchant account.

What Is Credit Card Surcharging?

A credit card surcharge is a fee added to a transaction when a customer pays with a credit card. The surcharge is meant to cover the merchant's cost of accepting that card. It appears as a separate line item on the receipt and cannot be applied to debit card transactions, even if the debit card is run as credit.

The maximum surcharge allowed by Visa and Mastercard is 3% of the transaction amount, or the merchant's actual cost of acceptance, whichever is lower. In practice, most merchants surcharge between 2.5% and 3%.

Important distinction: Surcharging is different from a cash discount program. A surcharge raises the price for credit card users. A cash discount lowers the price for cash payers. The legal treatment is very different. For a full comparison, read our guide on surcharging vs. cash discounts vs. dual pricing.

The Legal Landscape: How We Got Here

For decades, the card networks prohibited merchants from adding surcharges. That changed in 2013 when a class-action settlement in In re Payment Card Interchange Fee and Merchant Discount Antitrust Litigation allowed merchants to surcharge for the first time.

Then came Expressions Hair Design v. Schneiderman (2017), a Supreme Court case that shaped how states can regulate surcharging. The Court ruled that New York's anti-surcharge law regulated speech (how prices are communicated), not conduct (what merchants charge). This meant states could not simply ban the word "surcharge" without raising First Amendment concerns. The ruling forced several states to rethink their anti-surcharge statutes, and some repealed them entirely.

The result is a patchwork of state laws. Some states explicitly ban surcharging. Others allow it with conditions. And some have laws on the books that have been struck down or are no longer enforced.

States That Currently Ban or Restrict Surcharging

As of early 2026, the following states have laws that ban or significantly restrict credit card surcharging. This list changes periodically as legislatures update statutes and courts issue new rulings.

States With Active Surcharge Bans

• Connecticut - General Statutes Section 42-133ff prohibits surcharges on credit card transactions. This law has been upheld and remains enforceable.
• Massachusetts - Chapter 140D, Section 28A prohibits merchants from imposing surcharges on credit card payments. One of the oldest and most consistently enforced bans.
• Puerto Rico - While not a state, Puerto Rico maintains its own surcharge ban that applies to merchants operating in the territory.

States With Bans That Have Been Challenged or Modified

• Colorado - Previously had a surcharge ban, but it was repealed. Surcharging is now legal with proper disclosure.
• Kansas - The surcharge ban was repealed in 2018. Surcharging is legal.
• Maine - Previously banned surcharges. The law was amended and surcharging is now permitted with proper disclosure requirements.
• New York - The original anti-surcharge law was challenged in Expressions Hair Design v. Schneiderman. After the Supreme Court remanded the case, the Second Circuit struck down New York's law as unconstitutionally vague. Surcharging is effectively legal, but merchants must clearly disclose both the regular price and the surcharge amount.
• Oklahoma - Had a surcharge ban that was struck down. Surcharging is now permitted.
• Texas - The anti-surcharge law was struck down as unconstitutional in Rowell v. Pettijohn (2017). Surcharging is legal.
• Florida - The original surcharge ban was struck down in Dana's Railroad Supply v. Bondi (2015). Surcharging is legal but must be disclosed clearly.
• California - The Ninth Circuit struck down California's anti-surcharge law in 2018. Surcharging is legal with disclosure requirements.

States Where Surcharging Is Legal (Remaining States)

All other states allow credit card surcharging, provided merchants comply with card network rules and any applicable state disclosure requirements. This includes:

Alabama, Alaska, Arizona, Arkansas, Delaware, Georgia, Hawaii, Idaho, Illinois, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Mississippi, Missouri, Montana, Nebraska, Nevada, New Hampshire, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oregon, Pennsylvania, Rhode Island, South Carolina, South Dakota, Tennessee, Utah, Vermont, Virginia, Washington, West Virginia, Wisconsin, and Wyoming.

Note: Even in states where surcharging is legal, you must follow Visa and Mastercard rules. Failing to comply with network rules can result in fines of up to $25,000 per violation and termination of your merchant account.

Visa and Mastercard Surcharge Compliance Requirements

The card networks have their own rules that apply regardless of state law. These rules changed significantly in recent years, so make sure you are following the current requirements.

Visa Surcharge Rules (2026)

1. Maximum surcharge: 3% of the transaction amount, or the merchant's actual cost of acceptance, whichever is lower. Previously this cap was 4%, but Visa reduced it.

2. Notification requirement: You must notify Visa and your acquiring bank at least 30 days before you start surcharging. Your payment processor can typically handle this notification for you.

3. Disclosure at point of entry: You must post clear signage at the entrance to your business and at the point of sale notifying customers that a surcharge will apply to credit card transactions. Visa provides a surcharge signage PDF with the exact language and formatting requirements.

4. Disclosure on receipt: The surcharge must appear as a separate line item on the receipt. It cannot be hidden in the total.

5. Credit cards only: You cannot surcharge debit cards, prepaid cards, or EBT cards, even when they are run as credit.

6. Brand-level vs. product-level surcharging: You can surcharge at the brand level (all Visa transactions) or the product level (only certain Visa card types). Most merchants choose brand-level surcharging because it is simpler.

7. Cannot surcharge more than your cost: If your effective processing rate is 2.4%, you cannot surcharge 3%. The surcharge must reflect your actual cost.

Mastercard Surcharge Rules (2026)

Mastercard's rules are similar to Visa's with some differences:

1. Maximum surcharge: 3% of the transaction amount, or the merchant's actual cost of acceptance, whichever is lower.

2. Registration required: You must register with Mastercard through your acquirer before surcharging.

3. Disclosure requirements: Same as Visa. Clear signage at the entrance, at the point of sale, and on the receipt.

4. No debit card surcharges: Same as Visa. Debit cards cannot be surcharged.

5. Online transactions: If you surcharge in-store, you must also surcharge for online transactions (and vice versa). Mastercard requires consistency across channels.

American Express Surcharge Rules

American Express historically prohibited surcharging, but after the 2013 settlement, they were required to allow it. Their rules align closely with Visa and Mastercard: 3% maximum, disclosure requirements, and no surcharging debit or prepaid products.

Discover Surcharge Rules

Discover also allows surcharging under similar terms. The surcharge cannot exceed 3% and must be disclosed to customers before the transaction.

How to Implement Surcharging Legally: Step-by-Step

If you have decided that surcharging is the right approach for your business, here is exactly how to set it up properly.

Step 1: Confirm Your State Allows Surcharging

Check the list above. If you are in Connecticut or Massachusetts, stop here. Surcharging is not an option. Consider a cash discount program instead.

Step 2: Notify Your Payment Processor

Contact your payment processor and tell them you want to implement surcharging. They will handle the required notifications to Visa, Mastercard, and the acquiring bank. This notification must happen at least 30 days before you begin surcharging.

At Sleft Payments, we handle this entire process for our merchants. We file the notifications, configure your terminal, and provide compliant signage. Check our savings calculator to see how much surcharging could save your business.

Step 3: Calculate Your Actual Processing Cost

Your surcharge amount should be based on your actual effective rate, not some arbitrary number. To calculate your effective rate:

Effective Rate = Total Processing Fees / Total Credit Card Sales Volume

For example, if you processed $50,000 in credit card sales last month and paid $1,200 in total processing fees, your effective rate is 2.4%. That means your surcharge should be 2.4%, not 3%.

According to the Federal Reserve's most recent Payments Study, the average merchant discount rate for credit card transactions is approximately 2.22%. If you are paying more than that, you may want to review your processing agreement. The Nilson Report tracks these figures annually.

Step 4: Set Up Proper Signage

You need signs in three locations:

1. At the entrance to your business (the door or entrance area)
2. At the point of sale (near the terminal or register)
3. On the receipt (as a separate line item)

The signage must include:

• A statement that a surcharge applies to credit card transactions
• The percentage amount of the surcharge
• A note that the surcharge does not apply to debit cards

Visa provides template signage on their regulations and fees page.

Step 5: Configure Your Payment Terminal

Your terminal or POS system must be configured to:

• Automatically identify whether a card is credit or debit
• Apply the surcharge only to credit card transactions
• Display the surcharge as a separate line item on the receipt
• Not surcharge debit cards, even when they are processed as "credit" on a dual-function card

This is a critical step. If your terminal surcharges a debit card, you are in violation of both network rules and potentially state law. Make sure your processor configures this correctly.

Step 6: Train Your Staff

Your employees need to understand:

• What the surcharge is and why it exists
• How to explain it to customers who ask
• That debit card transactions are never surcharged
• How to process a refund that includes the surcharge (the surcharge must be refunded too)

A simple script works well: "We apply a small service fee to credit card transactions to cover our processing costs. If you pay with a debit card or cash, there is no additional fee."

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💰 Want to see how much you're overpaying? Use our free savings calculator to find out in 30 seconds. Or get a free statement analysis from our team.

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Common Surcharging Mistakes That Get Merchants in Trouble

Mistake 1: Surcharging Debit Cards

This is the most common violation. Many terminals cannot distinguish between credit and debit cards without proper configuration. If you surcharge a debit card, you can face fines from the card networks and complaints from customers.

Mistake 2: Surcharging More Than Your Cost

If your effective rate is 2.3% and you surcharge 3%, you are making a profit on the surcharge. That violates Visa and Mastercard rules and can result in fines of up to $25,000 per occurrence.

Mistake 3: Not Filing the Required Notifications

You must notify the card networks 30 days before you start surcharging. Skipping this step means every surcharged transaction is technically a violation.

Mistake 4: Inadequate Signage

"We charge extra for credit cards" scribbled on a Post-it note does not meet the disclosure requirements. Use proper signage that includes the exact surcharge percentage and follows the card network templates.

Mistake 5: Applying Surcharges Inconsistently

You cannot surcharge Visa but not Mastercard (unless you are doing product-level surcharging with proper registration). If you surcharge in-store, Mastercard requires you to surcharge online as well. Consistency is required.

The Economics of Surcharging: Is It Worth It?

Let us run the numbers for a typical small business.

Scenario: A restaurant processing $40,000/month in credit card sales

• Average processing cost (interchange-plus pricing): 2.3%
• Monthly processing fees: $920
• Annual processing fees: $11,040

With surcharging at 2.3%:

• Surcharge revenue collected from customers: ~$920/month
• Net processing cost to the business: approximately $0 (minus any debit transactions that cannot be surcharged)

If 70% of your transactions are credit cards and 30% are debit, you would eliminate about 70% of your processing costs. For this restaurant, that is roughly $7,700 per year back in the owner's pocket.

Will customers complain? Some will. Studies from the National Retail Federation show that 60-70% of consumers will still use a credit card even when a surcharge is applied. About 15-20% will switch to debit or cash. A small percentage may take their business elsewhere.

The key is transparency. Customers who feel surprised or tricked will complain. Customers who see clear signage and understand the fee generally accept it.

Surcharging vs. Other Fee Offset Strategies

Surcharging is not the only way to offset processing costs. Here is how it compares to alternatives:

For a deep dive into these options, read our complete comparison of surcharging, cash discounts, and dual pricing.

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💰 Want to see how much you're overpaying? Use our free savings calculator to find out in 30 seconds. Or get a free statement analysis from our team.

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Ready to stop overpaying? Sleft Payments offers transparent pricing with no contracts and no hidden fees. Get a free quote or call us at (215) 595-6671.

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Frequently Asked Questions

Can I surcharge on online transactions?

Yes, in states where surcharging is legal. The same rules apply: disclose the surcharge before the customer completes the transaction, display it as a separate line item, and do not surcharge debit cards. For online stores, the surcharge disclosure should appear on the checkout page before the customer enters payment information.

What happens if I surcharge in a state where it is banned?

You could face state-level fines and penalties. In Connecticut, violations can result in civil penalties. In Massachusetts, the Attorney General can take enforcement action. You could also face fines from Visa and Mastercard and potentially lose your merchant account.

Can I surcharge more than 3%?

No. The maximum surcharge allowed by both Visa and Mastercard is 3% of the transaction amount, or your actual cost of acceptance, whichever is lower. Exceeding this limit violates network rules and could expose you to fines.

Do I need to surcharge the same amount on every card brand?

If you are doing brand-level surcharging, you must surcharge all card brands at the same rate. If you want to surcharge different amounts for different card types, you need to register for product-level surcharging, which is more complex and typically only makes sense for very large merchants.

Can I surcharge on recurring payments or subscriptions?

Yes, but you must clearly disclose the surcharge when the customer signs up for the recurring payment. The surcharge should be included in the disclosure of the total recurring charge amount.

Is there a difference between a "surcharge" and a "convenience fee"?

Yes. A surcharge is a fee added to a credit card transaction to offset processing costs. A convenience fee is a fee charged for using an alternative payment channel (like paying a utility bill by phone instead of in person). Convenience fees have different rules and are more restrictive. Most merchants should not use the term "convenience fee" for what is actually a surcharge.

How do refunds work with surcharges?

If you issue a refund for a surcharged transaction, you must refund the surcharge amount as well. The total refund should include the original transaction amount plus the surcharge.

Will surcharging affect my processing rates?

No. Surcharging does not change your interchange rates or your processor's markup. It simply allows you to pass the cost to the customer. However, you should be on interchange-plus pricing to accurately calculate your surcharge amount. If you are on flat-rate or tiered pricing, you may not know your true cost. Learn about interchange-plus pricing and why it matters.

Can my landlord or franchise prohibit surcharging?

Possibly. Your lease or franchise agreement may include terms that restrict surcharging. Review your agreements before implementing. Some shopping centers and malls prohibit surcharging as a condition of the lease.

The Bottom Line

Credit card surcharging can save your business thousands of dollars per year. But it requires careful implementation. You need to check your state laws, follow the card network rules, set up proper signage, configure your terminal correctly, and train your staff.

If this sounds like a lot, it does not have to be. At Sleft Payments, we handle the entire surcharge setup for our merchants, from notifications to signage to terminal configuration. We also make sure your surcharge amount accurately reflects your actual processing cost, so you stay compliant.

Ready to see how much you could save? Try our savings calculator or contact us for a free statement analysis.

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This guide is for informational purposes and should not be taken as legal advice. Surcharging laws change frequently. Consult with a legal professional in your state before implementing a surcharge program. Last updated February 2026.