As the U.S. moves more toward a cashless economy, the subject of merchant fee charges when processing credit card payments becomes more topical.
Most businesses will take on any merchant fees that come along with processing credit card payments. However, some pass this fee to the consumer.
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 the specifics, it’s important to distinguish between the two kinds of fees that a business can charge: convenience fees and surcharges.
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 have to 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.
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 have to 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).
Can businesses charge a fee in Canada?
Initially, surcharges were reserved for U.S.-based businesses. However, merchants in Canada filed a lawsuit in 2011 for the right to impose surcharges to offset credit card processing fees.
In 2017, merchants were granted this right. As of this ruling, Canadian merchants have been able to levy credit card surcharges under similar rules as U.S. merchants.
How much a business can 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 lowest amount, even if it costs the business over that amount to process your credit card payment.
Convenience fees work in a similar way 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 |
| Alabama | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Alaska | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Arizona | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Arkansas | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| California | Illegal, except charges approved by the California Public Utilities Commission | Retailers may not impose credit card surcharges but may offer discounts for payment by cash, check or other methods unrelated to credit cards. Charges for payment by credit card that are approved by the California Public Utilities Commision are allowed |
| Colorado | Illegal | Credit cards surcharges may not be added to any sales or lease transactions. Discounts may be offered for payment by cash, check or other methods unrelated to credit cards, but must be clearly disclosed and offered to all customers |
| 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 | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| District of Columbia | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Florida | Illegal | Credit cards surcharges may not be added to any sales or lease transactions. There is no statute on discounts for different payment methods |
| 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 | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Idaho | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Illinois | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Indiana | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Iowa | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Kansas | Illegal | Credit card surcharges may not be added to any sales or lease transactions. There is no statute on discounts for different payment methods |
| Kentucky | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Louisiana | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods. |
| Maine | Illegal, except for governmental entities | Credit card surcharges may not be added to any sales or lease transactions. Governmental entities may charge surcharges if they are clearly disclosed before payment and there is no statute on discounts for different payment methods |
| 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 | 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 five 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 | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Missouri | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Montana | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Nebraska | Legal | 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 | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| New Jersey | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| New Mexico | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| New York | Illegal | Credit card surcharges may not be added to any sales transaction. There is no statute on discounts for different payment methods |
| North Carolina | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| North Dakota | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Ohio | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Oklahoma | Illegal, except for sellers registered with the U.S. Treasury Department as money transmitters | 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 |
| Oregon | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Pennsylvania | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Rhode Island | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| South Carolina | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| South Dakota | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Tennessee | Legal | 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 | Credit card surcharges may not be added to any sales transaction. There is no statute on discounts for different payment methods |
| Utah | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Vermont | Legal | No prohibition for credit card surcharges and no statute on discounts for different payment methods |
| Virginia | Legal | 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
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| West Virginia | Legal | 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 five percent for payment by cash, check or other methods unrelated to credit cards |
Can gas stations charge for using a credit card?
Gas stations 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.
In states where it is legal to impose credit card surcharges, you can be charged more for using your credit card to pay. However, just because a state doesn’t allow surcharges doesn’t mean you won’t pay more in some cases.
Depending on the state, a business can offer discounts to customers for using payment methods other than credit cards. For example, a gas station may charge you less for paying with cash or check rather than a credit card.
Just like convenience fees and surcharges, discounts have to be clearly communicated at the pump, register and on your receipt. In most states, there is a limit to how much a gas station can offer as a discount (usually no more than five percent).
Reasons some businesses charge a fee
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 in order to process credit card payments. However, those fees can add up. In order for a business to avoid paying that fee every time someone uses a credit card, the fee is passed on to the consumer in the form of a surcharge.
While some merchants don’t know that they can charge extra, many avoid it simply because they value their customers. 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.
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