• Seeing retailers offer discounts for cash payments — or assess fees when customers pay by credit card — is becoming more common than ever.
  • In most U.S. states, adding convenience fees to credit card transactions is legal, but there are still rules businesses must follow when doing so.
  • Learning about the convenience fee rules that affect your area can help ensure you aren't overcharged on your credit card transactions.

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As the U.S. moves toward a cashless economy, the subject of credit card processing fees passed on by small business sellers becomes more topical.

Many businesses take responsibility for the merchant fees that come along with processing credit card payments by incorporating them into their pricing. However, some pass these fees to the consumer. But are convenience fees legal? Can businesses charge you for using a credit card? Let’s take a closer look:

Convenience fees and surcharges: Common fees businesses charge

In short, merchant fees are legal in most states as long as the business follows the necessary protocols. But before diving into these specific protocols, it’s important to distinguish between the two kinds of fees that a business can charge: convenience fees and surcharges.

What is a convenience fee?

A convenience fee is charged when a customer uses a form of payment that isn’t customary for the business. For example, a business that typically accepts online payments may offer the option to pay by phone for a fee. Convenience fees are legal in all 50 states but must be clearly communicated at the point of sale. Additionally, a convenience fee can only be imposed if there’s another preferred form of payment as an option.

What is a surcharge?

When a business charges a fee for a form of payment, whether in person, online or by phone, it’s called a surcharge. Credit card surcharges are applied when you use your credit card to make a payment. In states where surcharges are legal, they must be clearly displayed at the point of sale and on your receipt. Regulations for surcharges are U.S.-specific, and merchants are prohibited from imposing surcharges on card payments abroad (with the exception to this rule being Canada).

Who can charge for using a credit card?

You may be wondering why a seller would charge you a fee if you’ve already paid for your purchase. The reason most sellers charge fees boils down to how credit card transactions work.

Card issuers charge a merchant fee whenever you use your credit card. The merchant is expected to cover this fee to process credit card payments. However, those fees can add up. In some cases, businesses pass these fees on to consumers in the form of surcharges to avoid incurring the additional costs themselves.

While some merchants don’t know they can charge extra, many avoid doing so simply because of the potential to create negative customer sentiment. It can also present a hassle for certain businesses to figure out how to impose the charges. Instead, many businesses take on the cost of processing credit card payments as a part of their overhead.

Gas stations, for example, fall under the category of businesses that can charge convenience fees and surcharges. However, the reason you are paying more with a credit card at the pump may come down to a game of semantics.

How much can a business charge for using a credit card?

When a business chooses to impose a credit card surcharge, there are protocols that have to be followed. For one, the business has to notify the appropriate credit card associations and clearly disclose that it charges a fee for the use of a credit card. Credit card surcharges can’t exceed the cost of accepting the card or four percent, whichever is the lower amount, even if it costs the business more than that amount to process your credit card payment.

Convenience fees work similarly as they are meant to help a business cover processing costs. Convenience fees usually range between two and three percent of the purchase price. Both of these fees are meant to help a business make up for any processing fees it may have to pay when you make a payment. For this reason, fees should not exceed the processing fee amount. If businesses attempt to charge more, they should be reported to your card issuer.

Surcharge legality by state

Credit card surcharges are handled differently in each state. Here’s a breakdown of what you can expect from businesses around the country.

State The legality of credit card surcharges State law synopsis
Sources: National Conference of State Legislatures, Merchant Maverick
Alabama Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Alaska Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Arizona Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Arkansas Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
California Illegal Anti-surcharge laws remain in place in the state, but may be unenforceable due to recent court decisions.
Colorado Legal There is now no prohibition for credit card surcharges. Sellers may still offer discounts for payment by cash, check or other methods unrelated to credit cards.
Connecticut Illegal Credit card surcharges may not be applied by any seller, however, sellers may set a minimum purchase amount. Sellers may also offer discounts for payment by cash, check or other methods unrelated to credit cards.
Delaware Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
District of Columbia Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Florida Illegal Anti-surcharge laws remain in place in the state, but may be unenforceable due to recent court decisions.
Georgia Legal Convenience fees can be charged if other payment options without fees are offered. There is no statute on discounts for different payment methods.
Hawaii Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Idaho Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Illinois Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Indiana Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Iowa Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Kansas Illegal Anti-surcharge laws remain in place in the state, but may be unenforceable due to recent court decisions.
Kentucky Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Louisiana Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Maine Illegal Anti-surcharge laws remain in place in the state, but may be unenforceable due to recent court decisions.
Maryland Legal Sellers may offer a cash discount for payment by cash.
Massachusetts Illegal Credit card surcharges may not be added to any sales transaction. Sellers may offer discounts for payment by cash, check or other methods unrelated to credit cards.
Michigan Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Minnesota Legal Sellers may impose a credit card surcharge of no more than 5 percent of the purchase price. Surcharges must be clearly posted and communicated before payment. Sellers may not impose surcharges on their own branded credit cards and there is no statute on discounts for different payment methods.
Mississippi Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Missouri Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Montana Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Nebraska Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Nevada Legal Sellers may offer discounts for payment by cash, check or other methods unrelated to credit cards.
New Hampshire Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
New Jersey Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
New Mexico Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
New York Illegal Anti-surcharge laws remain in place in the state, but may be unenforceable due to recent court decisions.
North Carolina Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
North Dakota Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Ohio Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Oklahoma Illegal Anti-surcharge laws remain in place in the state, but may be unenforceable due to recent court decisions.
Oregon Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Pennsylvania Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Rhode Island Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
South Carolina Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
South Dakota Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Tennessee Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Texas Illegal, except in the case of a government entity or private school Anti-surcharge laws remain in place in the state, but may be unenforceable due to recent court decisions.
Utah Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Vermont Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Virginia Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Washington Legal Sellers may offer discounts for payment in cash.
West Virginia Legal There is no prohibition for credit card surcharges and no statute on discounts for different payment methods.
Wisconsin Legal Sellers may offer discounts for payment by cash, check or other methods unrelated to credit cards.
Wyoming Legal Sellers may offer a discount of no more than 5 percent for payment by cash, check or other methods unrelated to credit cards.

The bottom line

As a consumer, it can be frustrating to face extra fees for a business to cover the cost of processing credit card payments. But passing on credit card fees to customers is legal in the majority of the U.S. Whether or not a merchant can charge them boils down to local laws and the parameters provided by payment processing networks. Being familiar with the restrictions in your area is important to ensure you aren’t overcharged.