Are Credit Card Surcharge Fees Legal? A 2022 Guide

Credit card surcharges – optional fees that merchants can add to credit card transactions – have been a hot topic lately. On one hand, surcharging helps merchants save money on card processing costs. On the other hand, surcharging fees have long been unpopular with customers and may cause them to shop elsewhere.

All of this, however, belies the real question: is surcharging legal? Here’s all you need to know about the legality of surcharging and whether it’s the right choice for your business.

Is Surcharging Legal?

As of right now, only two states still outlaw all uses of credit card surcharges: Connecticut and Massachusetts. If you live in any other state, you can choose to add a surcharge fee, but you’ll have to closely follow state laws and the rules set by card brands. The rule books specify how to disclose fees on your signage, which amount you’re allowed to charge, and more.

How to Add Surcharge Fees

You can add a surcharge fee to almost any credit card transaction, but you’ll need to follow protocols to ensure transparency. Under Visa and Mastercard, you’ll first need to register the surcharge fee with the payment network. Then, they’ll display a notice of the surcharge at your point of sale. You’ll also need to indicate the surcharge fee on the receipt.

Finally, you’ll need to decide whether you’ll add surcharges at the brand or product level. A brand-level surcharge adds the same fee to all transactions from one payment network. A product-level surcharge applies to particular types of Visa and Mastercard, such as Visa Inspire. The maximum surcharge fee you can add is 4% of the card transaction.

Should You Add Surcharge Fees?

As you can see, adding surcharge fees is legal almost everywhere. Surcharging is also one of the best ways to stop losing profits to credit card processing fees, which keep getting higher. However, adding surcharge fees may not be the right option in every situation.

As mentioned, the main downside of surcharge fees is that customers frown upon extra fees. That’s particularly noticeable in areas where few businesses charge extra fees. If businesses in your local area tend to not include surcharging fees, there’s a chance that adding them will turn some customers away. Consider this factor before adding surcharge fees to your business.

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