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As a business owner, you are reading this post because you accept credit cards and are tired of paying for someone else’s perks with your margins. Surcharge fees are one way to shift credit card processing costs to the cardholder who chooses the convenience and perks of their rewards card. As experts in surcharging, business owners frequently ask us questions about what surcharging is and how to get started. Below we answer the questions we commonly hear.

General Questions

Q: What is credit card surcharging?

A: An additional fee that you add as a merchant to a customer’s bill when they choose to use a credit card for payment.

Q: Am I legally allowed to add a surcharge to credit card transactions? 

A: If you are a merchant in the United States or its territories, and your business is not in Connecticut, Maine, New York or Massachusetts, you are legally permitted to add a surcharge to certain credit card transactions. However, you must comply with card brand, consumer disclosure, and other requirements.

Q: What factors should I consider before I choose to surcharge?

A: Before you decide to apply a surcharge fee on credit card transactions, you should consider the following:

  • how it may impact your customer’s experience
  • what your competitors in the industry are doing
  • card network surcharging rules
  • legal requirements for your state and your profession
  • accounting implications
  • staff training

Implementation Questions

Q: What are the rules regarding disclosure to customers?

A: If you choose to apply a surcharge fee, you must disclose it as a surcharge fee and inform customers about it at the point of entry and the point of sale – whether online or in-store – as well as on every receipt as a dollar amount.

Q: Are there any restrictions on surcharging in my state?

A: Could be. At present, four states and one territory have surcharging prohibitions. These are Connecticut, Maine, New York, Massachusetts, and Puerto Rico. We recommend you talk with counsel about your state and industry.

Q: Can a surcharge be added to debit card transactions?

A: No. Surcharge fees are permitted only on credit card transactions. Therefore, purchases made through debit cards or prepaid cards cannot be surcharged.

Q: Is surcharging allowed when the customer using a debit card chooses “credit” at the POS terminal?

A: No. a Surcharge fee cannot be added to debit card transactions in this situation.

Q: Are any limits imposed on the amount of the surcharge? 

A: Yes. You can assess a credit card surcharge only up to the merchant discount rate for the applicable credit card or up to a maximum of 3% effective April 28, 2023.

Q: Am I allowed to surcharge one credit card brand and not the others?

A: Yes. You have to choose a brand or product level. A brand-level surcharge is where one fee is charged across all credit cards from a card brand. Product level surcharging allows you to pick and choose the types of cards surcharge. (Business credit cards vs. consumer charge cards)

Fee Comparisons

Q: How is a surcharge different from a convenience fee?

A: The surcharge is the fee a customer pays simply for using a credit card, which is a percentage of the transaction amount not exceeding 3%. However, a convenience fee is only allowed on online and phone payments (“Card Not Present” transactions), and it is a fixed amount and not a percentage.

Q: If I have store operations in multiple states, which include some states where surcharging is prohibited. Does this mean I am not allowed to surcharge in any state where I operate?

A: Generally, credit card companies do not prevent merchants from adding a surcharge fee in states where it is permissible, even when it is prohibited in other states.

Q: Can I apply the surcharge fee on international credit card transactions? 

A: No. You can only surcharge on credit card purchases for your customers in the United States or U.S. territories.

Q: Am I permitted to offer a “cash discount” program?

A: A compliant cash discount program requires a merchant to post and advertise credit prices. Credit prices include the costs of processing credit cards. When a customer pays with cash or an in-store gift card, there is a decrease in the price taken at point-of-sale. Legal cash discount programs present a clear receipt detailing the fee or cash discount amount. Cash discount programs are not credit card surcharges because they do not levy a fee added to a credit card transaction.

A cash discount program may be compliant when it shows the “cash price” and “credit card price” side by side equally prominently whenever a price is quoted or posted. However, cash discount programs almost always fail to meet these requirements. This type of cash discounting puts the merchant at risk of fines from the card brand and the regulatory authorities.

Other Questions

Q: Can I include the surcharge fee when processing a chargeback? 

A: Yes. The chargeback can be for the total transaction amount, including the amount of the fee.

Q: If I do not disclose the surcharge to a customer at the point of sale, can the credit card issuer pursue compliance?

A: Yes, it can.

Q: Can I apply a different surcharge fee to different credit card transactions?

A: Yes, but you’ll have to choose the product level. Product level allows you to pick and choose the types of cards. (Business credit cards vs. consumer charge cards)

Q: Are there other fee-based options?

A: Yes, other fee-based options, such as site and convenience, allow you to charge a fee on all transactions. A service fee can is an option for qualifying government entities or educational institutions.

Partner with IntelliPay – A Leader in Fee-Based End-to-End Payment Transactions

As business owners, we can help you reduce or eliminate credit card processing costs. IntelliPay’s specialists and our intelligent platform will take care of all the behind-the-scenes requirements.

We ensure that you comply with the latest changes in surcharging rules from card brands and shifting laws and regulations.  Our sales team will be happy to help you make the transition successfully. And, if surcharging isn’t right for you, we are experts in convenience, site, service, and traditional (absorbed) fee payment processing. Send us a statement for a free analysis and see if we can save you money on traditional processing

Accept any type of payment – online payments, virtual, on-demand, recurring installments, EMV, and text and email. Plus, integrations, APIs, tokenization, Lightbox, Hosted Web pages, and virtual terminals provide a complete solution no matter your requirements. As a result, we help you solve business, technical and financial challenges.

To get started or learn more, complete this online form to schedule a consultation with one of our payment professionals.