What Is Surcharging? A Plain-English Guide for Business Owners

Card processing fees are one of the biggest line items many small businesses pay, and more owners are asking whether they can pass those costs on to customers. One of the most common ways to do that is surcharging. But surcharging comes with card brand rules, state restrictions, caps and disclosure requirements that trip up a lot of merchants.

This guide explains what surcharging means, how it works, where it's restricted, and how it compares to alternatives like dual pricing and cash discount programs.

What Is a Surcharge?

In general, a surcharge is an extra charge added on top of the normal price. In payments, a credit card surcharge is a fee a merchant adds to a transaction when the customer pays with a credit card, to offset the cost of accepting that card.

For example, if your item costs $100.00 and you surcharge 3%, a customer paying with a credit card pays $103.00, while a customer paying with cash, or in most cases a debit card, pays $100.00.

The key idea: surcharging starts with your regular price and adds a fee for credit cards. That framing matters, because it's what separates surcharging from cash discount and dual pricing programs.

How Surcharging Works

A compliant surcharge program generally involves these steps:

1. Notify your processor and the card brands. Visa and Mastercard both require merchants to notify their acquirer (processor) at least 30 days before they begin surcharging. Mastercard also requires notice to Mastercard, and the acquirer registers the merchant.
2. Apply the surcharge to credit cards only. Under Visa and Mastercard rules, surcharges cannot be applied to debit or prepaid cards, even if a debit card is run "as credit."
3. Stay under the cap. The surcharge can't exceed your actual cost of acceptance, and the card brands set maximums (more below).
4. Disclose it clearly. Signs at the store entrance (or on the first page of an online checkout), at the point of sale, and the surcharge amount shown as a separate line on every receipt.
5. Follow state law. Several states and territories restrict or prohibit surcharging entirely.

Card Brand Surcharging Rules (Visa and Mastercard)

Here's a summary of the major card brand rules as published by the networks:

Visa

• Credit cards only; no debit or prepaid cards.
• Maximum surcharge: the lower of your merchant discount rate or 3%.
• 30 days' advance written notice to your acquirer.
• Disclosure at the store entrance, at the point of sale, and on every receipt.

Mastercard

• Credit cards only; no debit or prepaid cards.
• Maximum surcharge: your merchant discount rate, with an absolute cap of 4% (in practice, if you accept Visa too, many merchants stay at or below 3%).
• 30 days' advance notice to Mastercard and your acquirer.
• Disclosure at the point of sale and on the receipt.

Other networks, such as American Express and Discover, have their own rules, so check each brand you accept. Rules change, so always confirm current requirements with your processor before starting.

Is Surcharging Legal? State Rules

Surcharging is allowed in most U.S. states, but not all. According to Visa's merchant surcharging guidance (updated February 2024):

• Prohibited: Connecticut, Maine, Massachusetts, Oklahoma and Puerto Rico prohibit credit card surcharges.
• Allowed with specific requirements: Colorado, Minnesota, New Jersey and New York allow surcharging but have their own caps, disclosure or pricing rules.

What about Florida? Florida Statute §501.0117 historically prohibited surcharges on credit card purchases while permitting discounts for cash. In 2015, the U.S. Court of Appeals for the Eleventh Circuit held the surcharge ban unconstitutional (Dana's Railroad Supply v. Attorney General of Florida). The statute's language remains on the books, and the same law expressly allows merchants to offer a discount for cash payments to all customers. Because state laws change and enforcement can vary, Florida merchants should confirm the current position with their processor or an attorney before surcharging.

This article is general information, not legal advice.

Surcharging vs. Cash Discount (Dual Pricing) vs. Non-Cash Adjustment

These three programs are often confused. Here's how they differ:

Surcharge vs. convenience fee: a convenience fee is a flat fee for using an alternative payment channel (for example, paying online instead of in person). It's not the same as a surcharge, and it carries its own card brand rules.

Non-cash adjustment: this phrase is often used for programs where the posted price includes the cost of card acceptance and cash customers get a reduction. When programs are set up poorly, they can look like a surcharge to card brands. Structure matters.

Pros and Cons of Surcharging

Pros

• Offsets a meaningful share of credit card costs.
• Customers paying with cash or debit aren't affected.

Cons

• Debit cards can't be surcharged, so a large share of fees remains.
• Caps, registration, and multi-point disclosure requirements.
• Not allowed in some states.
• Customers may feel "hit" by a fee at checkout.
• Requires your system to tell credit cards from debit cards accurately.

How Pine Payments' Clover Dual Pricing Is Different

Instead of adding a fee at checkout, dual pricing shows customers two prices up front: a cash price and a card price. For example, an item might be $10.00 cash or $10.40 card. The customer chooses how to pay, knowing the price in advance.

With Pine Payments:

• Clover has dual pricing built in, so both prices are calculated and shown automatically. Learn more about Clover dual pricing.
• The card price applies to debit cards too, and the cash price is for cash only, which covers the debit volume that surcharging can't touch.
• No setup fees and no contracts.
• Up and running within 72 hours.
• New Clover equipment included, depending on volume, for dual pricing accounts.
• ACH solutions are available for businesses that take bank payments (no personal checks).

For many businesses, this approach can reduce processing costs dramatically. See how our zero-fee processing approach works, and get the right cash discount signs so customers understand both prices.

Wondering about the legal side of passing card fees to customers? Read our guide: Is it legal to charge a credit card fee?

How to Decide: Surcharging or Dual Pricing?

Ask yourself:

1. What share of your card volume is debit? If it's large, surcharging leaves most of your fees in place.
2. Do you operate in a state that restricts surcharging? If so, surcharging may not be an option at all.
3. Do you want customers to see the price before checkout? Dual pricing shows both prices up front.
4. Do you want to avoid card brand registration and receipt-line requirements? A properly set up dual pricing program on Clover handles pricing display automatically.

If you're unsure, talk to a payments specialist who can review your statements and recommend the right setup.

Frequently Asked Questions

What is surcharging? Surcharging is adding a fee to a transaction when a customer pays by credit card, to offset the merchant's cost of card acceptance. It must follow card brand rules and state law.

Can you surcharge debit cards? No. Visa and Mastercard rules prohibit surcharging debit and prepaid cards, even if the debit card is processed as credit.

What is the maximum credit card surcharge? Visa caps surcharges at the lower of your merchant discount rate or 3%. Mastercard caps them at your merchant discount rate, up to a maximum of 4%.

Which states prohibit credit card surcharges? Per Visa's guidance (February 2024), Connecticut, Maine, Massachusetts, Oklahoma and Puerto Rico prohibit surcharging, and Colorado, Minnesota, New Jersey and New York have specific requirements.

Is surcharging legal in Florida? Florida's surcharge ban (§501.0117) was held unconstitutional by the Eleventh Circuit in 2015, and the statute expressly allows cash discounts. Confirm current rules with your processor or attorney.

What's the difference between surcharging and dual pricing? Surcharging adds a fee to credit card payments only. Dual pricing shows a cash price and a card price up front; with Pine Payments on Clover, the card price applies to both credit and debit.

Ready to Lower Your Processing Costs?

Pine Payments helps businesses in Miami-Dade and Broward switch to Clover dual pricing with no setup fees, no contracts, and setup within 72 hours, plus new Clover equipment for qualifying dual pricing accounts.

Call 786-383-1656 or learn about our dual pricing program.

Sources - Visa, "Merchant Surcharging Q&A" (updated Feb 15, 2024): https://usa.visa.com/dam/VCOM/global/support-legal/documents/merchant-surcharging-qa-for-web.pdf - Mastercard, "Merchant Surcharge Rules": https://www.mastercard.com/us/en/business/support/merchant-surcharge-rules.html - Mastercard, Merchant Surcharge FAQ (PDF), linked from the page above - Florida Statutes §501.0117: http://www.leg.state.fl.us/statutes/index.cfm?App_mode=Display_Statute&URL=0500-0599/0501/Sections/0501.0117.html - Dana's Railroad Supply v. Attorney General, State of Florida, No. 14-14426 (11th Cir. Nov. 4, 2015)