Updated October 2026
IntelliPay is a PCI DSS Level 1 certified payment processor working with businesses, utilities, schools, and government agencies nationwide. This guide compares the four ways to pass card costs to customers and helps you pick the one that fits your business.
Quick Read
Surcharges, dual pricing, convenience fees and service fees are four different programs with four different rule sets. Calling one by another’s name doesn’t change which rules apply.
- Surcharge: a percentage added to credit card payments only. Banned in four places and capped in others.
- Dual pricing: a card price and a lower cash price, shown up front. Allowed almost everywhere, but not in Puerto Rico.
- Convenience fee: a flat fee for paying through an extra channel, such as online or by phone.
- Service fee: a network program for government, higher education and, since October 2025, utilities.
Government agencies, schools and utilities should usually start with a service fee. Most other businesses choose between surcharging and dual pricing.
Key Facts: Passing Card Fees to Customers in 2026
- Visa caps credit card surcharges at 3% and Mastercard at 4%, and neither allows a surcharge above the merchant’s actual cost of acceptance.
- Credit card surcharging is prohibited for private businesses in Connecticut, Maine and Massachusetts, and in Puerto Rico.
- Puerto Rico’s consumer affairs department interprets its law to forbid cash discounts as well, and the First Circuit upheld that law in 2025.
- Effective October 18, 2025, Visa added utilities classified under merchant category code (MCC) 4900 to its Service Fee Program, which previously covered government and higher education.
- Debit and prepaid cards can never be surcharged under card network rules, and Texas, Maine and Louisiana also ban debit surcharges by state law.
What Is the Difference Between a Surcharge, Dual Pricing, a Convenience Fee and a Service Fee?
All four recover some or all of your card processing cost, but each one works differently and follows its own rules:
| Surcharge | Dual pricing | Convenience fee | Service fee | |
|---|---|---|---|---|
| How it works | A fee added when a customer pays by credit card | Two posted prices: the card price and a lower cash price | A flat fee for paying through an alternative channel | A fee allowed under a card network program for eligible merchant types |
| Who can use it | Most merchants, where state law allows | Most merchants, except in Puerto Rico | Merchants that offer more than one way to pay | Eligible government, higher education and utility (MCC 4900) merchants |
| Debit cards | Never | Usually pay the card price; confirm your program’s setup | Depends on network rules for the channel | Generally allowed under the program |
| Amount | Percentage, up to your cost, Visa’s 3% cap, or a lower state cap | You set both prices and display them clearly | A flat amount, not a percentage | Flat, percentage or both, within program rules |
| Setup | 30 days’ notice to your processor; signs at entry, checkout and on the receipt | Both prices shown before payment; follow state price display rules | Disclose before payment and keep a no-fee way to pay | Registration through a participating processor |
| Best fit | Retail and B2B with mostly credit card customers | Retail, restaurants and service businesses with many debit customers | Businesses that mostly take payments in person but also online or by phone | Government, schools and utilities |
What Does Each Model Look Like on a $100 Sale?
Assume your cost to accept a credit card is 2.6%. Here is what three customers would pay under each model. These numbers are illustrations, not recommended prices.
| Model | Credit card | Debit card | Cash or ACH |
|---|---|---|---|
| Surcharge (2.6%) | $102.60 | $100.00 | $100.00 |
| Dual pricing | $100.00 (card price) | $100.00 (card price) | $97.40 (cash price) |
| Convenience fee ($2.95, phone payments only) | $102.95 by phone, $100.00 in person | Depends on network rules | $100.00 |
| Service fee (eligible merchants) | $100.00 plus the program fee | $100.00 plus the program fee | $100.00 |
The pattern is the point. A surcharge recovers nothing on debit cards, so it works best when most customers pay by credit. Dual pricing recovers cost from every card payment because it’s a discount for cash, not a fee for cards. Federal law protects a merchant’s right to offer that kind of discount.
What Are the Rules for Surcharging?
- Credit cards only. No surcharge on debit or prepaid cards, even if the customer runs a debit card as credit.
- Never more than your cost. Visa caps surcharges at 3% and Mastercard at 4%, and your cost of acceptance is the real ceiling. Oklahoma caps surcharges at 2% or your cost, whichever is less. Colorado lets you use either a 2% cap or a cap equal to your actual processing cost.
- Notice and disclosure. Notify your processor 30 days before you start, post notice at the entrance or website entry and at checkout, and show the surcharge as its own line on the receipt.
- State bans. Not allowed for private businesses in Connecticut, Maine, Massachusetts or Puerto Rico. Texas has a ban on the books whose enforceability is disputed. New York, California and Minnesota add price display rules.
- What may change. If the Visa and Mastercard settlement becomes final, merchants could surcharge at the brand or product level, such as premium cards only, capped at 3% or cost. A final approval hearing has been reported for November 2026. None of it is in effect yet.
State by state details are in our Surcharge & Interchange Fee Laws 2026: State-by-State Guide.
What Are the Rules for Dual Pricing?
- Show both prices before the customer pays. The card price and the cash price should both be visible on the shelf, menu, invoice or checkout screen.
- Frame it as a cash discount. If you post one low price and add a fee only at the card terminal, card networks treat it as a surcharge, and every surcharge rule applies.
- Follow state price display rules. Some states, including Maine and New York, have specific rules about how card and cash prices are shown.
- Not in Puerto Rico. Puerto Rico’s consumer affairs department interprets its law to forbid cash discounts, so dual pricing is not a safe option there.
What Are the Rules for Convenience Fees?
- Only for an alternative channel. The fee pays for the convenience of paying online or by phone when you normally take payments another way. If online is your only channel, you can’t charge a convenience fee for it.
- Flat amount. The fee is a fixed dollar amount, not a percentage of the sale.
- You charge it. The fee is processed by the merchant, not a separate third party.
- Keep a free option. Disclose the fee before payment and keep a way to pay without it.
What Are the Rules for Service Fees?
A service fee is the right model for most government agencies, higher education institutions and utilities. These are card network programs tied to eligible merchant category codes. Unlike a surcharge, a service fee can generally apply to debit cards, so the agency recovers cost on more payments. Effective October 18, 2025, Visa added utilities classified under MCC 4900 to its Service Fee Program. Before that, service fees were limited to government and education. Registration through a participating processor is required. See our guide to service fees vs. convenience fees for eligibility details.
How Do You Choose the Right Model?
Answer these five questions in order. The first one that applies usually points to your model.
- Are you a government agency, school or utility? Start with a service fee.
- Do you sell in Puerto Rico? Surcharges and cash discounts are both off the table there. Talk to counsel about what’s left.
- Do you sell in Connecticut, Maine or Massachusetts? You can’t surcharge. Dual pricing is the usual alternative.
- Do many customers pay by debit? A surcharge recovers nothing on debit cards. Dual pricing usually recovers more.
- Do you mostly take payments in person, with online or phone as an extra option? A convenience fee on the extra channel may be enough.
If none of these apply, compare surcharging and dual pricing on your own numbers: your card mix, your average sale, and how your customers will react.
The bottom line
Pick the model that fits who you are and where you sell, then set it up exactly by that model’s rules. The label you put on a fee doesn’t change which rules apply to it.
Want help comparing models on your own card mix? Talk with an IntelliPay consultant.
Talk to a ConsultantWhere IntelliPay Fits
IntelliPay supports all four models: surcharging, dual pricing, convenience fees and service fees, including Visa’s Service Fee Program for government, education and MCC 4900 utilities. Our pricing is transparent interchange-plus with no junk fees.
We can’t tell you whether a specific fee is legal for your business. That’s a question for your attorney. But we’ll run the numbers on your card mix and set up whichever model you choose to card network rules.
Frequently Asked Questions
What is the difference between a surcharge and dual pricing?
A surcharge is a fee added only when a customer pays by credit card. Dual pricing shows two prices up front, a card price and a lower cash price, so it works as a discount for cash rather than a fee for cards. Different rules apply to each.
Is dual pricing legal everywhere?
Almost. Dual pricing set up as a cash discount is generally allowed, even in states that ban surcharges, and federal law protects a merchant’s right to offer cash discounts. Puerto Rico is the exception, because its regulators interpret the law to forbid cash discounts too.
Can a surcharge apply to debit cards?
No. Card network rules prohibit surcharging debit and prepaid cards everywhere, and Texas, Maine and Louisiana also ban debit surcharges by state law.
When can I charge a convenience fee?
Only for an alternative payment channel, such as online or phone payments when you normally take payments another way. The fee must be a flat amount, disclosed before payment, with a no-fee way to pay still available.
Who can charge a service fee?
Eligible government agencies, higher education institutions and, since Visa’s October 18, 2025 expansion, utilities classified under MCC 4900. Service fees require registration through a participating processor and can generally apply to debit cards.
Which states ban credit card surcharges?
Credit card surcharging is prohibited for private businesses in Connecticut, Maine and Massachusetts, and in Puerto Rico. Oklahoma and Colorado cap surcharges, Texas has a disputed ban, and New York, California and Minnesota add price display rules.
What is the maximum credit card surcharge?
Visa caps surcharges at 3% and Mastercard at 4%, and neither allows more than your actual cost of acceptance. Oklahoma caps surcharges at 2% or your cost, whichever is less, and Colorado lets you use either a 2% cap or a cap equal to your actual processing cost.
Can I call my surcharge a service fee?
No. Card networks look at how a fee works, not what it’s called. A fee added only to card payments is treated as a surcharge, and service fees are limited to eligible government, education and utility merchants registered in a network program.
Suggested Reading
- Surcharge & Interchange Fee Laws 2026: State-by-State Guide
Where surcharging is banned, capped or restricted, and which interchange laws are in effect. - Service Fee vs. Convenience Fee
Eligibility and setup for government, education and utility service fees. - Convenience Fees for Utilities: Why They Fall Short
Why MCC 4900 utilities are moving to service fees. - You Decided to Surcharge. Here Are the 6 Mistakes That Still Get Merchants Fined
The most common surcharge compliance errors. - Build a Surcharge Program That Survives an Audit
Documentation and controls that hold up under review. - IntelliPay Payment Models
How IntelliPay sets up each fee program.
Sources
- ACI Worldwide, Visa’s service-fee update for utilities: What changes and what doesn’t
- Cornell Legal Information Institute, 15 U.S.C. §1693o-2 (merchant discounts for cash and other payment methods)
- Maine Bureau of Consumer Credit Protection, Credit and Debit Card Surcharges
- ABA Banking Journal, First Circuit rules federal law does not preempt Puerto Rico’s credit card surcharge law (2025)
- Justia, Texas Business and Commerce Code §604A.0021
- Oklahoma Legislature, Enrolled Senate Bill 677 (effective November 1, 2025)
- DWMK, Sellers and Lessors Limited in Credit Card Surcharges to Consumers and Lessees (C.R.S. §5-2-212)
- Payments Dive, Court approves Visa-Mastercard settlement (June 2026)
Disclaimer: This article is for general educational purposes only and is not legal, financial or compliance advice. Card network rules for surcharges, convenience fees and service fees are detailed and change often, and state laws vary and are subject to pending litigation. The examples are illustrations, not recommended prices. Confirm current rules with an attorney and your payment processor before starting, changing or ending any fee program.
Last updated: October 2026
