Passing Credit Card Fees to Customers: Dual Pricing, Cash Discounts, and Surcharging Explained

Key Takeaways

• Most states now allow credit card surcharging or dual pricing, but local rules vary. A few—California, Connecticut, Maine, and Massachusetts—still prohibit or limit surcharges.
• Surcharging, dual pricing, and cash discounting all shift some or all card processing costs to customers—but differ legally and operationally.
• Dual pricing—displaying one price for cash/ACH and another for card—is the most universally compliant option across the U.S.
• Cash discounting offers an instant price incentive for non‑card payments.
• Surcharging requires strict disclosure, caps (usually 3–4%), and advance registration with Visa/Mastercard.
• Debit card surcharges are never allowed under federal or network rules.
• IntelliPay provides PCI DSS‑compliant solutions for dual pricing and surcharging that meet updated 2025 requirements.

Why Businesses Shift Fees

Processing fees continue to rise, driven by network updates, rewards card programs, and compliance costs. Many merchants recover these growing fees by giving customers a choice: pay with a card and cover some of the cost, or pay with cash, check, or ACH for a lower price.

This strategy—whether through dual pricing, a cash discount, or surcharging—can reduce or eliminate your merchant‑paid fees while remaining transparent and compliant.

The Three Models: How They Differ

1. Dual Pricing – Customer Choice, Full Transparency

What It Is:
Dual pricing displays two clear prices: one for card payments and one for cash or ACH. The higher “card price” includes processing costs; the lower price reflects the cash or alternative payment rate.

How It Works:
At checkout, customers choose which payment option to use. The difference between prices covers the card processing cost.

Why It’s Legal Everywhere:
Dual pricing isn’t a “surcharge.” It’s simply two posted prices for the same product, giving customers a true choice—making it compliant in all 50 states when displayed correctly.

Example:
A car wash lists $10.00 for cash/ACH and $10.35 for card payments. Each amount is clearly printed on signage and receipts.

Best For:
Retailers, service businesses, and municipalities that want a simple, compliant, and transparent pricing model.

Explore full implementation details in The Complete Guide to Dual Pricing.

2. Cash Discounting – Incentive for Paying with Cash or ACH

What It Is:
Cash discounting provides a discount at checkout if a customer pays with cash or an ACH payment instead of a credit card. Posted prices already include the processing cost, and the “discount” is removed when cash is used.

Key Difference from Surcharging:
Discounts are applied to non‑card payments rather than adding a fee to card payments.

Example:
A utility bill includes a $3.00 service fee by default. When the customer pays by ACH, the fee is waived—making the final total lower.

Best For:
Merchants with high in‑person or cash volume, such as restaurants, municipalities, or retail.

3. Surcharging – Passing the Fee to Credit Card Users

What It Is:
A surcharge is a small, disclosed fee—usually up to 3–4%—added to a purchase when a customer pays with a credit card. It shifts part or all of the processing cost to the cardholder.

Rules to Follow:

• Surcharges may apply only to credit card transactions—never debit or prepaid cards.
• The maximum surcharge is capped at 4% (Visa & Mastercard rule).
• Merchants must notify their acquirer and card networks 30 days before starting
• The surcharge must appear as a separate line item on receipts (“Credit Card Surcharge” or similar).
• Surcharges cannot exceed the actual cost of acceptance.
• Signage must disclose the practice clearly at the point of entry and payment.

Legal Status (as of October 2025):

• Banned: California, Connecticut, Maine, Massachusetts, Puerto Rico
• Limited or Conditional:
  • Colorado: up to 2%
  • New York, New Jersey, South Dakota, Nevada: cannot exceed actual processing costs
  • Texas: legal gray area but risk remains; consult counsel before implementing
• Fully Legal: 40+ other states
  (Source: 2025 rulings summarized from MerchantCostConsulting and IntelliPay B2B Surcharging Guide)

Best For:
Professional services, B2B, and high‑ticket industries where credit card usage is common but ACH options are viable.

Legal Reminders

• Always document that the surcharge equals or is less than your cost of acceptance.
• Maintain clear signage at entrances and points of sale.
• Update software and terminals to include separate line‑item surcharge disclosures.
• Debit and prepaid transactions cannot be surcharged, even if run as “credit.”
• Periodically check state legislation—laws shift frequently.

(This information is for educational purposes only and not legal advice. Merchants should confirm state and network rules or seek counsel before implementation.)

Which Cost‑Shifting Model Is Right for You?

IntelliPay’s Compliance‑First Approach

IntelliPay offers PCI DSS 4.0‑certified solutions for:

• Dual pricing and surcharge programs that automatically calculate and display compliant totals.
• Cash discounting tools that integrate ACH and alternate payment incentives.
• Transparent reporting showing reduced Merchant Discount Rates and fee recovery percentages.
• Automatic legal updates to match new Visa, Mastercard, or state requirements.

Whether you’re a high‑volume auto dealer, government agency, utility department, or small retailer, IntelliPay helps you offset processing costs responsibly and stay compliant in every jurisdiction.

FAQs

Is it legal to charge customers for using a credit card?

Yes, in most states, credit card surcharges are legal if you follow state laws and Visa/Mastercard’s 30‑day notice and signage rules. Debit card surcharges remain prohibited nationwide.

Is dual pricing the same as surcharging?

No. Dual pricing shows two prices upfront. Surcharging adds a separate fee at checkout. Dual pricing is universally permitted; surcharging is not.

Is cash discounting easier to implement?

Yes. Cash discounts reward alternative payment methods and don’t require network registration, making them simpler for smaller merchants.

What’s the safest option nationally?

Dual pricing offers the most compliant and transparent path for businesses that want to legally offset card processing expenses in all 50 states.

Which IntelliPay program should I choose?

IntelliPay specialists can review your payment ecosystem and recommend the ideal combination of dual pricing, ACH integrations, or surcharging—ensuring you meet local, network, and PCI requirements while keeping costs low.

Disclaimer

The information provided in this article is for general informational and educational purposes only. IntelliPay does not provide legal, tax, or financial advice. Readers should not interpret the content as legal guidance or a substitute for professional consultation.

While every effort has been made to ensure the accuracy and timeliness of the information presented, processing rates, regulations, and compliance requirements (including PCI DSS and state surcharging laws) may change without notice. IntelliPay makes no representations or warranties regarding the completeness, accuracy, or reliability of the material.

Merchants and readers are encouraged to consult qualified legal or compliance professionals or contact their state regulatory authority before implementing any pricing, surcharging, or fee‑recovery program.