IntelliPay is a PCI DSS Level 1 certified payment processor offering ACH and card processing for businesses, government agencies, and professional services firms nationwide, with fee model options including dual pricing, service fees, and traditional merchant-absorbs processing.
Quick Answer
Is it legal to pass credit card fees to customers?
In most states, yes. Surcharging is legal when you disclose it properly and stay within your actual cost of acceptance. Connecticut, Massachusetts, Maine, and Puerto Rico prohibit it. California and Texas have bans that federal courts found unconstitutional, but enforcement is still uncertain in both. Debit card surcharging is prohibited everywhere. Laws change. This guide covers what is current, what the card networks require, and what your options are if surcharging does not work for your state or situation.
Processing fees are real money. For a business doing $500,000 a year in card volume, even 2.5% adds up to $12,500. Passing some or all of that cost to customers who pay by credit card is a legal option in most states. But the rules are specific, they vary by state, and they change more often than most merchants realize.
This guide is current as of June 2026. Because state laws change, verify requirements with qualified counsel before launching any fee program.
Contents
- The Federal Picture
- How Much Can You Charge?
- What Changed in 2025 and 2026
- Minnesota
- California
- Oklahoma
- Illinois Interchange Fee Prohibition Act
- Visa/Mastercard Interchange Settlement
- What the Card Networks Require
- Your Other Options
- Dual Pricing
- Convenience Fees
- Service Fees
- Cash Discount Programs
- Steer Customers Toward ACH
- What to Look for in a Processor
- Frequently Asked Questions
- Related Reading
The Federal Picture
No federal law prohibits credit card surcharging for merchants. What federal law does prohibit is debit card surcharging, under the Durbin Amendment. That prohibition applies in every state regardless of what state law says. A merchant in a state that fully allows credit card surcharging still cannot add a surcharge to a debit card transaction, even when the debit card is run as credit.
Credit card surcharging is governed at the state level, subject to Visa and Mastercard rules that apply everywhere. Both networks require merchants to notify their acquirer and the card networks at least 30 days before starting a surcharge program. Under Visa's surcharge rules, the fee must be disclosed at the point of entry, at the point of sale, and shown as a separate line item on every receipt. Mastercard's rules follow the same structure.
How Much Can You Charge?
The surcharge is capped at the lower of your actual cost of acceptance or the card network limit. Visa caps at 3 percent. Mastercard caps at 4 percent. Since most merchants accept both networks, 3 percent is the effective ceiling for most programs.
The surcharge is cost recovery only. If you pay 2.2 percent to process a card, you cannot charge 3 percent. You recover what you pay, nothing more.
Here is where each state stands as of June 2026:
| State | Status as of June 2026 |
|---|---|
| Connecticut | Prohibited. The legislature reinforced the ban in 2023 and 2024. Cash discounts and dual pricing are permitted. |
| Massachusetts | Prohibited. Statutory ban actively enforced. Cash discounts and dual pricing are permitted. |
| Maine | Effectively restricted in practice. Confirm current enforcement guidance with an attorney before implementing any program. |
| Puerto Rico | Prohibited. Consumer protection laws ban surcharges on card transactions. |
| California | Statutory ban found unconstitutional by the Ninth Circuit. Surcharging with proper disclosure is generally permitted under current enforcement guidance, but the drip pricing law adds complexity. Consult a California attorney before launching. |
| Texas | Statutory ban found unconstitutional by federal courts. The Texas AG has issued opinions that the ban remains enforceable. Effectively restricted for most merchants. Convenience fees and service fees are permitted. Consult a Texas attorney before implementing a surcharge. |
| Colorado | Permitted. Capped at 2% or actual processing cost, whichever is lower. Signage required on-site and online. |
| Illinois | Permitted. No state surcharge cap beyond standard card network rules. Note: The Illinois Interchange Fee Prohibition Act (IFPA), which would have restricted interchange on the tax and gratuity portions of transactions, was delayed to July 2027 by the legislature and is subject to a federal court permanent injunction. Its outcome remains uncertain and does not affect surcharge rules directly. |
| Minnesota | Legal as of January 1, 2025. The surcharge must be avoidable by the customer. All mandatory fees must be built into advertised prices. Disclosure at the point of sale required. |
| New York | Permitted. Both the card price and cash price must be disclosed before the transaction. The total price including the surcharge must be shown upfront. |
| New Jersey | Permitted. Capped at actual processing cost. Cannot exceed what the merchant pays. |
| Oklahoma | Permitted following the overturning of the prior ban. Federal court found the ban unconstitutional. Standard card network rules apply. |
| All other states | Generally permitted subject to card network disclosure requirements and the actual cost cap. Verify your state before launching. |
This Table Changes
State surcharge laws are actively changing. Several states had bans overturned by federal courts in 2024 and 2025. Others are considering new restrictions. California and Texas are particularly complex because the legal situation does not track statute cleanly. Always confirm current law in your state, and any state where your customers are located, with a qualified attorney and your acquiring bank before launching any program.
What Changed in 2025 and 2026
Minnesota
Surcharging became legal on January 1, 2025. The surcharge must be avoidable, meaning customers must have a way to pay without incurring the fee. All mandatory fees must be in the advertised price. Point of sale disclosure is required.
California
The Ninth Circuit found California's statutory surcharge ban unconstitutional. Surcharging with proper disclosure is generally permitted. The complication is California's drip pricing law, which creates additional requirements around how fees are shown to customers. Merchants in California should get specific guidance from a California attorney before going live.
Oklahoma
Oklahoma's prior surcharge ban was found unconstitutional. The legislature cleared the path for compliant programs through SB 677. Standard card network rules apply.
Illinois Interchange Fee Prohibition Act
This is worth understanding separately from surcharge rules. The Illinois IFPA would have prohibited interchange fees on the tax and gratuity portions of credit and debit card transactions. It has had a rough road. Originally set for July 2025, delayed to July 2026, and now delayed again to July 2027 by the Illinois legislature. On June 1, 2026, a federal court also issued a permanent injunction blocking its core interchange fee provision as applied to national banks, federal savings associations, and card networks. The law's ultimate fate is uncertain. It does not directly affect surcharge rules in Illinois.
Visa/Mastercard Interchange Settlement
On November 10, 2025, Visa and Mastercard announced a revised settlement in the long-running Payment Card Interchange Fee antitrust case. A federal judge granted preliminary approval in June 2026. Final approval is not expected until late 2026 or early 2027 at the earliest. Nothing has been implemented yet. If the settlement is finally approved, it would reduce the combined average effective U.S. credit interchange rate by 10 basis points for five years and cap posted rates for standard consumer cards. Large merchant groups including the National Retail Federation have opposed it. Watch for updates. See detailed coverage of the proposed settlement terms for the full breakdown.
What the Card Networks Require
Even in states where surcharging is legal, if you do not follow Visa and Mastercard rules you are out of compliance. Non-compliance can mean fines from $50,000 to $1 million and loss of card acceptance. Here is what both networks require:
Surcharge Compliance Checklist
Your Other Options
Surcharging is not the only way to manage processing costs. Depending on your state, your customer base, and how you bill, one of these may be a better fit.
Dual Pricing
Dual pricing shows customers two prices before they pay: one for card and one for cash, check, or ACH. No fee gets added at checkout. The customer picks their method and pays exactly what was shown. Dual pricing is generally legal in all 50 states, including the states that prohibit surcharging, when both prices are clearly displayed before the customer commits to a payment method.
The execution matters. A program that shows one price and then adds a percentage when the customer pays by card is a surcharge regardless of what you call it. Dual pricing has to show both prices upfront. Get that right and it is the cleanest path to cost recovery across all states. IntelliPay supports dual pricing programs. See the payment models page for a full comparison of available fee options.
Convenience Fees
A convenience fee is a flat dollar amount charged for using a specific payment channel, such as online or by phone, when your standard method is in-person. It must be a flat amount, not a percentage. It must apply equally to all payment methods in that channel. Government agencies, utilities, and educational institutions use these regularly. If your standard channel is in-person and you want to offset costs for remote payments, a convenience fee is the right structure. You cannot use a convenience fee and a surcharge on the same transaction.
Service Fees
A service fee is a flat fee for accepting a specific payment type. Government agencies and utilities use these most commonly. Service fees are not subject to the same state surcharge bans that affect standard merchants because they fall under a different card network category. If you are a government entity or utility, a service fee program is likely the right fit. IntelliPay has extensive experience setting these up for government clients.
Cash Discount Programs
Instead of adding a fee for card payments, you offer a discount for cash, check, or ACH. The economics land in the same place. The legal structure is different. Cash discounts are permitted in all 50 states, including the ones that prohibit surcharges. The card price is your standard price. The discount comes off when the customer chooses a cheaper method.
Steer Customers Toward ACH
For businesses with larger average invoices, this is often the simplest option. ACH processes through the Nacha-governed ACH network at a fraction of the cost of credit card processing. No fee program. No disclosure complexity. No state law exposure. Make ACH easy to find on your invoices and payment links and a meaningful share of large-balance customers will use it.
What to Look for in a Processor
Not every processor supports compliant fee programs. A few things to confirm before you commit.
Automatic fee calculation. The fee needs to be calculated accurately on every transaction and shown to the customer before they pay. If your staff has to calculate and add it manually, that is a compliance problem waiting to happen.
Debit card detection and blocking. Your program must never apply a surcharge to a debit card. A processor that cannot reliably identify and block debit cards will put you in violation on every affected transaction. Ask specifically how they handle this before you go live.
State-aware configuration for multi-location businesses. If you operate in Colorado and another state, you cannot apply the same surcharge percentage to both. The platform needs to handle this by location automatically.
Acquirer notification support. Both Visa and Mastercard require 30 days notice to your acquirer before you start. Your processor should handle this as part of onboarding your program, not leave you to sort it out on your own.
IntelliPay supports dual pricing, service fee, convenience fee, and cash discount programs. Talk to a consultant at intellipay.com/talk-to-a-consultant to figure out which option fits your business.
Frequently Asked Questions
Is it legal to charge customers a credit card processing fee?
In most states, yes. Surcharging is legal when properly disclosed and capped at your actual cost of acceptance. Connecticut, Massachusetts, Maine, and Puerto Rico prohibit surcharges. California and Texas have bans that federal courts found unconstitutional, but enforcement remains uncertain in both states. Always verify current law in your state with qualified counsel before starting a program.
Can merchants surcharge debit cards?
No. Debit card surcharging is prohibited under Visa and Mastercard network rules and under federal law through the Durbin Amendment. This applies in all 50 states, even when a debit card is run as credit. Your surcharge program must detect and block debit cards automatically.
What is the maximum credit card surcharge a merchant can charge?
The lower of your actual cost of acceptance or the network cap. Visa caps at 3% and Mastercard at 4%. Since most merchants accept both, 3% is the effective ceiling. Colorado caps at 2%. The surcharge can never exceed what you actually pay to process the card.
What is the difference between a surcharge and a convenience fee?
A surcharge is a percentage-based fee for paying by credit card instead of another method. A convenience fee is a flat dollar amount for using a specific payment channel such as online or by phone, when your standard method is in-person. Different rules and disclosure requirements apply to each. You cannot use both on the same transaction.
What is dual pricing and how is it different from surcharging?
Dual pricing shows two prices before the customer pays: one for card and one for cash or ACH. No fee is added at checkout. The customer chooses. Dual pricing is generally legal in all 50 states when both prices are clearly displayed before the customer commits to a payment method. Surcharging is prohibited in several states. Dual pricing is not.
What disclosure is required before charging a customer a surcharge?
Under Visa and Mastercard rules: notice at the point of entry and at the point of sale before the transaction completes, and the surcharge shown as a separate line item on the receipt. You must also notify your acquirer and the card networks at least 30 days before you start. State requirements may be more specific.
Not Sure Which Fee Model Is Right for You?
IntelliPay supports dual pricing, service fees, convenience fees, and cash discount programs.
An IntelliPay consultant can look at your business type, state, and customer base and tell you which approach makes the most sense. No obligation.
Talk to a Payment ConsultantKey Takeaways
Credit card surcharging is legal in most U.S. states when capped at actual processing cost and disclosed at the point of entry, point of sale, and on every receipt. Connecticut, Massachusetts, Maine, and Puerto Rico prohibit it. California and Texas have bans that federal courts found unconstitutional, but enforcement is unclear in both. Debit card surcharging is prohibited everywhere under federal law and card network rules, even when a debit card is run as credit.
The network cap is 3% for Visa and 4% for Mastercard, but the surcharge can never exceed your actual cost. Colorado caps at 2%. Minnesota legalized surcharging on January 1, 2025. The proposed Visa/Mastercard interchange settlement received preliminary court approval in June 2026 but is not yet in effect and will not be until final approval, expected in late 2026 or early 2027 at the earliest. Illinois surcharge rules are unchanged; the IFPA, which dealt with interchange on tax and gratuity, has been delayed to July 2027 and is under a federal court injunction.
For merchants in restricted states, dual pricing is generally legal in all 50 states and cash discount programs carry the lowest legal exposure of any fee option. IntelliPay is a PCI DSS Level 1 certified payment processor offering dual pricing, service fees, convenience fees, and cash discount programs nationwide. Laws change. Verify current requirements with your attorney and acquiring bank before launching any program.
Related Reading
Disclaimer
This article is for informational purposes only and does not constitute legal or compliance advice. Credit card surcharge laws vary by state and change frequently. Card network rules published by Visa and Mastercard are subject to change. State law information reflects publicly available sources as of June 2026 and may not reflect the most recent changes in your jurisdiction. California and Texas involve ongoing legal complexity; merchants in those states should consult a qualified attorney before implementing any fee program. Confirm all fee program requirements with your acquiring bank and a qualified attorney before implementation. ACH rules are governed by Nacha Operating Rules. All IntelliPay product features are subject to specific account configuration and applicable terms of service. Last updated: June 2026. IntelliPay is a registered ISO/MSP of Citizens Bank, Providence, RI, and Synovus Bank, Columbus, GA.
