Progressive Payment Solutions

What is Surcharging?

What is Surcharging

Learn what surcharging is, what the rules are, and how surcharging takes place. We’ll also see how you can avoid surcharging to save you and your customers money.

If money makes the world go round, then fees are what keeps it spinning.

The fact is, fees are everywhere. For example, try buying a plane ticket, paying a cell phone bill, or renewing your passport. In each case, you’ll be paying fee upon fee.

However, the savvy business person knows how to avoid them—or pass them on to someone else, at least. 

Which is the main reason merchants pursue surcharging: passing their fees onto their customers. 

But is it that simple? What do you need to know about surcharging to decide if it’s right for your business? We’ll examine exactly what surcharging is, what the rules are surrounding it, and if there’s a better way to do things.

First, let’s find out exactly what it is.

What is a credit card surcharge?

Ever since credit card payments began, someone had to pay for the extra steps surrounding them. After all, paying with a credit card is much more complicated than a consumer simply using cash or check to pay. 

The fact is, there are fees involved for a merchant to process a credit card payment. Which is what surcharging is: the merchant adding a small fee to the customer’s total to pay for processing their credit card. 

Thus, the extra cost gets added to the price that the customer pays. However, that’s not to say any business can tack on an extra fee to whatever they charge their customer. 

Rather, the merchant needs to follow the laws in order to surcharge legally.

Where is surcharging allowed?

A merchant needs to first check to see if surcharging is allowed in their state, since it’s not legal in the entire United States. 

For example, Visa states that the following states do not legally allow surcharging as of 2021: California, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Texas, and Utah. 

However, four of these states— California, Texas, Florida, and New York— have challenged these bans in court. What will finally come of these legal challenges is still unclear.

Even if you’re allowed to surcharge in your state, it’s still important to make sure the laws are only applied to credit card transactions and not debits, as we’ll see below.

Is surcharging only for credit card transactions?

Just because a customer hands over a card with a “Visa” or “Mastercard” logo on the corner, doesn’t mean the merchant can surcharge that transaction―it may be a debit transaction, which is entirely different.

It’s very important to note that it’s illegal to impose a surcharge on a debit or prepaid card. The rules that came from the Dodd-Frank Wall Street Reform and the Consumer Protection Act strictly prohibit this.

Now that we know where and what types of transactions can be surcharged, it’s time to see what steps are necessary to impose surcharges.

How surcharging takes place

Since surcharging is a highly-regulated process, it’s important to understand the necessary steps before you can begin to put it into practice with your business. 

Notifying card networks and processors

Every card network needs to know at least 30 days in advance that you plan on surcharging. This must be in writing and can’t be done over the phone. 

The only exception to the 30 day notice rule is American Express. With them, you just need to meet their own unique requirements.  

Along with the card networks, you also need to alert your payment processor. This will help avoid any unnecessary fees or other potential headaches connected to surcharging. 

Notifying consumers

These laws and rules aren’t just for the big networks—they are for the consumer as well. That’s why a business needs to post a notice at their entryway that advises their customers a surcharge is added to all credit payments. 

Another notice needs to be posted at the point of sale, including the rate charged and that the surcharge isn’t greater than the merchant’s discounted rate.

Documenting surcharges

Simply notifying card networks and posting a sign isn’t enough; your business also needs to show both the customer and the card network the amount surcharged.

The customer is notified of the surcharge amount on their receipt, where it is included as a line item.

Certain card networks, which include Visa and Mastercard, also require the merchant to include the surcharge amount in the transaction sent to them. This means any equipment a merchant uses to process credit cards must provide the transaction surcharge as part of the credit card transaction. 

Can you avoid surcharging?

No one likes to pay fees, and so passing them on to the customer might sound appealing. But, that’s not to say surcharging is for everyone.

For one thing, it’s not allowed in all 50 states. Also, implementing surcharging also means complying with some very specific rules.

Fortunately, there’s a simpler, better alternative that’s legal in all 50 states: cash discounting. 

Surcharging and cash discounting may appear to be similar at first. However, they differ in a few key ways.

Cash Discounting takes a different approach to pricing: instead of charging an extra fee (surcharging), Cash Discounting allows a business to advertise a price if the consumer pays with cash, check, or debit. The price is automatically increased if they choose to pay with a card to compensate for the processing fees incurred. 

Another advantage of Cash Discounting is it’s legal in all 50 states. So no matter where you run your business, you can save thousands of dollars in fees by going with a Cash Discount Program. 

Curious about Cash Discounting? Take a closer look at how it works here


Surcharging has its benefits. The biggest advantage is that your business may not have to pay credit card processing fees. However, that’s assuming it’s legal in your state and that you comply with each card network’s specific surcharging rules. 

Want to know more about what your options are to lower your processing fees? Then contact us. A PPS customer agent will be able to personally answer any questions you have.

We think you deserve to make the best choices for your business. Don’t you?

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