Surcharging
A surcharge is an extra checkout fee—a percentage of the purchase total—that a supplier might add to a transaction when the buyer pays via a credit card. (Surcharges are not allowed for debit card and prepaid card transactions). Conversely, a convenience fee is different, as it refers to a fixed amount, regardless of the purchase amount, that is added to the total. Convenience fees are sometimes called service fees or other term.
In the United States, the practice of surcharging was historically prohibited by the card networks, but, in January 2013, Mastercard and Visa began to allow it. American Express followed suit at the end of that year.
State Laws
State laws trump any rules imposed by the card networks in relation to card acceptance. At the beginning of 2013, many states had laws that prohibited or limited surcharging: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. However, state laws continuously change. Currently (2023), only Connecticut, Massachusetts, and Puerto Rico prohibit it.
Card Networks’ Rules
Each card network has rules pertaining to what merchants must do:
prior to begin adding surcharges (e.g., notify their merchant acquirer at least X days in advance)
to alert buyers prior to checkout
to execute/add a surcharge (e.g., separately display the surcharge amount on each applicable receipt)
Like state laws, card networks’ rules related to surcharging are subject to change. For example, Visa announced some changes, effective April 15, 2023, such as lowering the maximum surcharge percentage from 4% to 3%. Both Visa and Mastercard merchant surcharge rules can be found online through a simple search.
Related Resources
Podcast
Check out the AP Now podcast episode on card surcharges. AP Now’s Mary Schaeffer interviewed Lynn Larson, Recharged Education.
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