Understanding Credit Card Surcharge Laws in 2025
Credit card processing fees remain one of the largest operating costs for merchants. These costs can be even higher in industries considered high risk, but even traditional businesses often look for ways to reduce the impact. One option is credit card surcharging, which allows merchants to pass a portion of these fees to customers who choose to pay with a credit card.
Surcharging is not as simple as adding a fee to every transaction. Each state has its own regulations, and card networks such as Visa and Mastercard set additional limits and disclosure requirements. Some states allow surcharging with few restrictions, others cap the fee based on your actual cost of acceptance, and a small number of states prohibit the practice completely.
For merchants, this creates a compliance challenge, particularly for those who operate in multiple states or sell online across state borders. Mistakes can lead to penalties, customer disputes, or even the termination of a merchant account.
This guide provides a state by state breakdown of credit card surcharge laws for 2025, along with an overview of recent legal updates, compliance strategies, and how at Corepay, we help merchants remain compliant while offsetting processing costs.
Key Takeaways
- Most states allow surcharging as long as merchants follow card network rules.
- Visa caps surcharges at 3 percent, while Mastercard allows up to 4 percent, but neither can exceed the actual cost of acceptance.
- Debit and prepaid cards cannot be surcharged in any state.
- Some states impose stricter rules, while a few prohibit surcharging entirely.
- Merchants must provide clear disclosure at checkout and list the surcharge separately on receipts.
What Are Credit Card Surcharges and Why They Matter
A credit card surcharge is an additional fee that a merchant charges when a customer chooses to pay with a credit card. This fee is designed to offset some or all of the merchant’s cost of accepting card payments. Instead of absorbing the full cost of interchange fees and processing expenses, a business shifts part of the burden to the customer choosing to use credit.
Why Merchants Consider Surcharging
Credit card interchange fees average between 1.5 and 3.5 percent of the transaction amount. For a small business with thin margins, these fees can significantly reduce profitability. Larger merchants, particularly those in high risk industries such as telemedicine, nutraceuticals, or online gaming, often face even higher rates.
Surcharging can:
- Reduce the effective cost of card acceptance
- Protect profit margins
- Encourage customers to pay with lower cost payment methods such as debit cards, ACH, or cash
How Surcharges Differ from Cash Discounts
It is important to distinguish surcharging from cash discounting. With a surcharge, the listed price remains the same, but an additional fee is added at checkout if the customer pays with credit. With a cash discount, the posted price includes the credit card cost, and customers receive a discount if they pay with cash or debit. Cash discounts are legal nationwide, while surcharges are subject to state-specific laws.
Card Network Rules That Apply Everywhere
Even in states that allow surcharging, card network rules must be followed. The most important are:
- The surcharge must not exceed the lower of your actual processing cost or the network maximum (3 percent for Visa, 4 percent for Mastercard).
- Debit and prepaid card transactions cannot be surcharged under any circumstances.
- Merchants must provide clear signage at the point of entry and point of sale, both in person and online.
- The surcharge must appear as a separate line item on the receipt.
- Merchants must notify Visa and Mastercard at least 30 days before beginning to surcharge.
Why Surcharging Matters in 2025
With inflation, rising interchange fees, and the expansion of high risk industries, more businesses are exploring surcharge programs. At the same time, regulators and state legislatures are paying closer attention to transparency and consumer protection. For merchants, understanding the difference between what is permitted by card networks and what is allowed by state law is essential to staying compliant.
States Where Surcharging Is Generally Permitted
The majority of states allow credit card surcharges as long as merchants comply with card brand rules and provide proper disclosure. In these states, the maximum surcharge is whichever is lower: your actual cost of card acceptance, Visa’s 3 percent cap, or Mastercard’s 4 percent cap. Debit and prepaid card transactions are never eligible for surcharges.
| State | Status | Max Surcharge | Key Notes |
|---|---|---|---|
| Alabama | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Alaska | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Arizona | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Arkansas | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Delaware | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Florida | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Georgia | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Hawaii | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Idaho | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Illinois | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Indiana | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Iowa | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Kansas | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Kentucky | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Louisiana | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Maryland | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Michigan | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Missouri | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Mississippi | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Montana | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Nebraska | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| New Hampshire | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| New Mexico | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| North Carolina | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| North Dakota | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Ohio | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Oregon | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Pennsylvania | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Rhode Island | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| South Carolina | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Tennessee | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Utah | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Vermont | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Virginia | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Washington | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| West Virginia | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Wisconsin | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
| Wyoming | Fully allowed | 4% (3% Visa) | Must follow card brand rules; surcharge must be disclosed. |
States That Prohibit Credit Card Surcharges
A small number of states continue to ban credit card surcharges entirely. If you operate in one of these states, you cannot pass card processing fees directly to your customers under any circumstances. You may still offer cash discounts, which are legal nationwide, but surcharges are not permitted.
| State | Status | Max Surcharge | Key Notes |
|---|---|---|---|
| California | Prohibited | N/A | Ban effective July 1, 2024. Classified as a junk fee under state law. |
| Connecticut | Prohibited | N/A | Longstanding ban. Cash discounts remain legal. |
| Maine | Prohibited | N/A | State enforces through Attorney General. Only cash discounts allowed. |
| Massachusetts | Prohibited | N/A | Strict enforcement. Regulators actively monitor for hidden fees. |
States Allowing Surcharging With Restrictions
Several states permit credit card surcharging but impose stricter rules than the general card brand limits. These restrictions usually tie the surcharge to the merchant’s actual processing cost or place a lower cap. Merchants in these states must be especially careful with disclosure and signage requirements.
| State | Status | Max Surcharge | Key Notes |
|---|---|---|---|
| Colorado | Allowed with limits | 2% or actual cost | State law caps surcharges at 2% or the cost of processing, whichever is lower. Clear disclosure required. |
| Minnesota | Allowed with limits | Must be disclosed in price | Effective Jan 1, 2025. Surcharges must be built into the advertised price. Additional signage required. |
| New Jersey | Allowed with limits | Actual cost only | Surcharge cannot exceed the merchant’s cost of acceptance. Disclosure required. |
| Nevada | Allowed with limits | Actual cost only | No statutory cap, but enforcement through consumer fraud statutes. Merchants fined if surcharge exceeds cost or is misleading. |
| South Dakota | Allowed with limits | Actual cost only | Fee cannot exceed processing cost. Excessive or undisclosed surcharges may result in prosecution. |
| Oklahoma | Allowed with limits | Card brand rules | State law technically prohibits surcharges, but courts found it unconstitutional. Ambiguity remains, but enforcement is unlikely. |
| New York | Allowed with limits | Actual cost only | Surcharge must reflect true cost of card acceptance. Flat-rate percentages not allowed unless they match actual cost. |
Recent Legal Developments and Federal Context
Credit card surcharge laws are not static. Over the past decade, court rulings, state legislation, and federal regulatory action have reshaped how merchants can apply surcharges. Staying informed on these changes is essential to compliance.
Supreme Court Involvement
In 2017, the United States Supreme Court ruled in Expressions Hair Design v. Schneiderman that state laws restricting how merchants disclose surcharges touch on free speech issues. This decision did not eliminate surcharge bans but opened the door to new legal challenges. Since then, several states that once prohibited surcharging have seen their laws weakened or struck down.
State-Level Shifts
- California: Implemented a new surcharge ban effective July 1, 2024, framing it as a “junk fee” issue under consumer protection rules.
- Texas and Kansas: Previously prohibited surcharging, but their bans were overturned in federal courts. Merchants may surcharge but must still follow card brand rules.
- Minnesota: Beginning January 1, 2025, surcharges must be built into the advertised price, marking one of the strictest transparency laws in the country.
- New York: Courts clarified that merchants may only pass on their actual cost of acceptance. Flat percentage add-ons that exceed true costs remain illegal.
Federal Oversight and the FTC
The Federal Trade Commission has begun targeting so-called “junk fees” across industries. While not a surcharge ban in itself, this initiative has influenced how states like California and Massachusetts address hidden charges. Regulators are increasingly requiring businesses to present total prices upfront, making clear disclosure of surcharge practices more important than ever.
Card Network Enforcement
Even when state laws allow surcharges, card brands impose strict requirements:
- Visa caps surcharges at 3 percent.
- Mastercard allows up to 4 percent.
- American Express requires equal treatment compared to other card brands.
- Discover prohibits surcharges that exceed the actual cost of processing.
Noncompliance with these rules can lead to fines or even termination of merchant accounts.
How to Stay Compliant With Credit Card Surcharge Laws
Merchants considering a surcharge program must balance both state-level requirements and card network rules. Compliance is not optional. Failing to follow these standards can lead to fines, lawsuits, and the loss of your ability to accept credit cards.
Key Steps for Compliance
- Notify Card Brands in AdvanceMerchants must notify Visa and Mastercard at least 30 days before implementing a surcharge program. This step is mandatory and ensures that your policy is registered with the networks.
-
Cap Fees AppropriatelyYour surcharge must be the lower of:
- Your actual processing cost
- Visa’s 3 percent cap
- Mastercard’s 4 percent capSome states, such as Colorado, impose even lower limits.
- Exclude Debit and Prepaid CardsDebit and prepaid card transactions cannot be surcharged under federal rules, even when they are processed as “credit.”
- Provide Clear Customer DisclosurePost signage at the point of entry and point of sale in physical locations. For online stores, disclose the surcharge before checkout.
- Itemize the Fee on ReceiptsThe surcharge must appear as a separate line item on the customer’s receipt. This transparency is required by both state law and card brand rules.
- Stay Updated on State Law ChangesSurcharge laws change frequently. California, New York, and Minnesota are examples of states that have modified or clarified rules in recent years. Merchants must regularly monitor for updates.
- Train Staff on Surcharge RulesEmployees should understand when a surcharge applies, how to explain it to customers, and how to handle disputes or complaints.
Surcharging vs. Cash Discount Programs
Merchants often confuse surcharging with cash discounting, but the two programs operate under very different rules. Understanding the difference is important for choosing the approach that best fits your business and staying compliant.
Surcharging
With a surcharge program, the listed price remains the same, but customers who choose to pay with a credit card see an additional fee at checkout. The fee is designed to offset credit card processing costs. Surcharging is subject to both state laws and strict card brand rules.
Cash Discounting
In a cash discount program, the posted price includes the cost of card acceptance. Customers who pay with cash, debit, or ACH receive a discount at checkout. Unlike surcharging, cash discounting is legal in all 50 states and is less tightly regulated, though disclosure requirements still apply.
Comparison Table
| Feature | Credit Card Surcharging | Cash Discounting |
|---|---|---|
| Legality by State | Allowed in most states, prohibited in some | Legal nationwide |
| Card Network Rules | Strict (caps, notifications, disclosures) | Fewer restrictions |
| Applies To | Credit card transactions only | All payment types (discount for cash) |
| Debit Cards Included | No | Yes (discount allowed) |
| Customer Perception | Viewed as an extra fee | Viewed as a savings opportunity |
| Compliance Burden | High | Moderate |
Which Option is Better?
- Surcharging is ideal for merchants with high card acceptance costs who want to pass those fees directly to customers, but only if they operate in states where it is permitted.
- Cash discounting works well for businesses that want to avoid the complexity of state-by-state surcharging laws while still reducing payment costs.
Risks of Improper Surcharging
While surcharging can help reduce payment processing costs, applying it incorrectly carries significant consequences. Merchants must weigh both the legal risks and the potential impact on customer relationships before implementing a surcharge program.
Legal Risks
- State Penalties: In states that prohibit surcharging, violations can result in fines or enforcement actions from the Attorney General’s office. California, Massachusetts, and Connecticut are known for active enforcement.
- Card Network Fines: Visa, Mastercard, American Express, and Discover enforce surcharge rules independently of state law. Failure to notify networks, exceeding caps, or surcharging debit cards can trigger fines and suspension of card acceptance privileges.
- Civil Lawsuits: Consumers or regulators may pursue legal action if surcharges are applied in a misleading or unlawful way, such as charging above actual cost or failing to provide clear disclosure.
Business Risks
- Chargeback Exposure: Customers who feel misled by surcharges are more likely to dispute charges, which increases chargeback ratios and can put merchant accounts at risk under Visa’s VAMP or Mastercard’s compliance programs.
- Customer Trust and Loyalty: Improperly disclosed surcharges may be viewed as hidden fees, damaging brand reputation and pushing customers toward competitors.
- Operational Confusion: Staff who are not properly trained may misapply surcharges, leading to inconsistent charges and customer complaints.
- Merchant Account Termination: Repeated noncompliance with surcharge rules can result in the termination of your processing account, making it harder to secure payment services in the future.
Why Compliance Matters
For merchants operating in multiple states, the combination of state laws, federal oversight, and card brand rules makes surcharging complex. This is why many businesses choose to work with processors that offer compliance support and automation to minimize risks.
How Corepay Supports Merchants With Surcharging
Managing credit card surcharges across multiple states can quickly become complicated. Merchants need a partner that not only processes transactions but also ensures compliance with evolving laws and card network rules. Corepay specializes in helping businesses reduce costs and stay compliant, even in high-risk industries.
Automated Compliance Through Netvalve
Corepay’s proprietary Netvalve payment gateway is designed to handle the technical challenges of surcharging. It automatically distinguishes between credit, debit, and prepaid cards, applies the correct surcharge amount, and ensures that fees never exceed the allowed cap. This automation eliminates guesswork for merchants and reduces the risk of fines or disputes.
Expertise in High-Risk Industries
Many high-risk businesses face elevated processing fees, making surcharging especially valuable. Corepay provides tailored merchant accounts for industries such as telemedicine, nutraceuticals, adult, CBD, and subscription services, helping offset costs while staying compliant with card brand requirements.
Chargeback Protection with CB-Alert
Surcharges can sometimes increase the likelihood of disputes if customers feel fees were unclear. Corepay offers CB-Alert, a real-time chargeback mitigation tool that helps merchants resolve issues before they escalate into full chargebacks, protecting accounts from termination.
Multi-State Compliance Support
For businesses that operate in multiple states or sell online nationwide, Corepay provides strategic guidance to ensure surcharge programs align with both state regulations and card network mandates. This includes ongoing updates as laws change, reducing compliance risk.
Beyond Surcharging
Even if surcharging is not the right fit, Corepay offers alternatives such as cash discounting, ACH acceptance, and advanced fraud tools, ensuring merchants have multiple ways to manage payment costs effectively.
Credit Card Surcharge Laws FAQs 2025
Are credit card surcharges legal in the United States?
Yes, surcharging is legal in most states, but a few still prohibit it entirely. Even where it is legal, merchants must follow card network rules that cap surcharge fees and require proper disclosure.
Which states do not allow surcharges?
As of 2025, California, Connecticut, Maine, and Massachusetts prohibit surcharges. Merchants in these states may offer cash discounts but cannot add a fee for credit card use.
Which states allow surcharges but with restrictions?
Colorado, Minnesota, New Jersey, Nevada, South Dakota, Oklahoma, and New York permit surcharges but impose stricter limits, such as caps based on actual processing costs or requirements to include surcharges in the advertised price.
What is the maximum surcharge I can charge?
The surcharge must be the lower of your actual processing cost or the network limit. Visa caps surcharges at 3 percent, while Mastercard allows up to 4 percent. Some states, such as Colorado, limit surcharges even further.
Can I apply a surcharge to debit card transactions?
No. Federal rules and card brand regulations prohibit surcharges on debit and prepaid card transactions, even if they are processed as “credit.”
What is the difference between a surcharge and a convenience fee?
A surcharge is an added fee for using a credit card, while a convenience fee is charged for using an alternative payment channel, such as paying by phone or online when another method is available. Convenience fees are subject to different rules and are not allowed in every industry.
Do I need to notify anyone before applying surcharges?
Yes. Merchants must notify Visa and Mastercard at least 30 days before implementing a surcharge program. Processors like Corepay can help with these notifications and setup requirements.
What happens if I violate surcharge laws?
Violations can result in state penalties, fines from card networks, lawsuits from consumers, and potential termination of your merchant account.
