When Businesses Can Charge You Extra for Using a Credit Card

What businesses are allowed to charge credit card fees

Yes, a business can charge you extra for paying with a credit card — but only under specific conditions, and the rules differ by card type and by state. The key distinction is between a surcharge (an extra fee added to your bill) and a discount (a lower price for paying another way). Federal law and card network rules allow one but restrict the other.

For Visa, Mastercard, and Discover, businesses can add a surcharge to your bill when you use a credit card, as long as they follow the rules: they must disclose the fee before you complete the purchase, the fee cannot exceed what the business actually pays the card processor (typically 2 to 4 percent), and they cannot surcharge debit cards or prepaid cards. American Express has different rules — businesses can surcharge Amex, but the fee is capped at 5 percent of the transaction.

State law can be stricter. California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas prohibit credit card surcharges entirely, even if the card networks allow them. If you live in one of these states, a business cannot legally add a surcharge to your credit card purchase, though they can still offer a discount for paying cash or by check.

Key Takeaways

• Businesses can surcharge Visa, Mastercard, and Discover up to the percentage they pay their processor, but must tell you the fee before checkout.
• American Express surcharges are capped at 5 percent of the transaction amount.
• Ten states — California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas — ban credit card surcharges altogether.
• Businesses can always offer a discount for paying cash, check, or debit card instead of credit, without any restrictions.
• Surcharges on debit cards and prepaid cards are prohibited by card networks, even in states where credit card surcharges are legal.

The difference between a surcharge and a discount

A surcharge and a discount look similar on your receipt but are treated very differently by law. A surcharge is an extra charge added because you chose to pay with a credit card — the base price stays the same, and you pay more. A discount is a lower price offered for paying a different way, like cash or debit.

The reason this matters: federal law and card networks allow discounts with almost no restrictions, but surcharges are tightly controlled. A business can say "cash price $100, credit card price $103" or "we give a 3 percent discount for cash" — both are legal everywhere. But adding a surcharge to a credit card purchase is banned in ten states and restricted in the others.

In practice, the math is identical to you as a customer. Either way, you pay more for using a credit card. The legal distinction exists because regulators want to prevent businesses from making credit cards look like the expensive option and cash look like the default, which could discourage card use.

How surcharges work in states where they are legal

In states that allow credit card surcharges, a business must follow three rules. First, they must tell you the surcharge amount or percentage before you finish paying — not after you swipe or tap. This can happen on a menu board, a sign at the register, on the website, or in a pop-up during online checkout. If you do not see the fee disclosed before you commit to the purchase, the business is breaking the rules.

Second, the surcharge cannot be higher than what the business actually pays to process the card. Most businesses pay their processor between 2 and 4 percent of each credit card transaction, depending on the card type and their processing agreement. A business cannot charge you 5 percent just because they feel like it — the fee must match their actual cost. The card networks require businesses to document this cost if challenged.

Third, the surcharge rules apply only to credit cards. Debit cards, prepaid cards, and gift cards cannot be surcharged, even in states where credit card surcharges are legal. This is a card network rule that overrides state law. If a business tries to add a fee to your debit card purchase, that is illegal everywhere.

American Express surcharge rules

American Express has its own surcharge cap that is higher than Visa, Mastercard, and Discover. Businesses can surcharge Amex up to 5 percent of the transaction, regardless of what they actually pay their processor. This is a fixed cap set by American Express, not a rule tied to the business's actual costs.

The disclosure requirement still applies — the business must show you the surcharge before you complete the purchase. And the same state bans apply: if you live in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, or Texas, a business cannot surcharge your Amex card, even though the card network technically allows it.

States that ban credit card surcharges

Ten states have made credit card surcharges illegal, period. They are California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. In these states, a business cannot add any surcharge to your credit card bill, no matter what the card networks say.

What businesses can still do in these states is offer a discount for paying another way. A gas station in California can advertise "cash price $3.50, credit price $3.65" or "3 percent discount for cash." The discount approach is legal everywhere, including in the ten surcharge-ban states. The practical effect on your wallet is the same, but the legal structure is different.

If a business in one of these states charges you a credit card surcharge anyway, you can dispute it with your card issuer or report it to your state's attorney general. Many businesses are not aware of the state-level restrictions and charge surcharges by mistake.

Where you are most likely to see surcharges

Credit card surcharges are most common in industries where transaction costs are high or margins are thin. Gas stations, convenience stores, and small restaurants sometimes use them. Online retailers occasionally add surcharges for certain payment methods. Utility companies and government agencies (like DMV offices or court systems) sometimes add fees for credit card payments, though these are often framed as "convenience fees" rather than surcharges.

You are less likely to see surcharges at large retailers, grocery stores, or chain restaurants. These businesses typically absorb the processing cost as part of doing business, partly because surcharges can frustrate customers and partly because they have the volume to negotiate lower processing rates with their payment processors.

If you see a surcharge you think is illegal, check whether you are in a surcharge-ban state. If you are, report it to your state's attorney general office. If you are not in a ban state, check whether the surcharge was disclosed before you completed the purchase and whether it matches the business's actual processing cost — though proving the latter is difficult without access to their processor agreement.

How to avoid or minimize credit card fees when shopping

The simplest way to avoid a credit card surcharge is to pay with a debit card, which cannot be surcharged. If the business offers a cash discount, paying cash will save you money. Some businesses offer discounts for paying by check or ACH transfer, though these are less common.

If you are shopping online, look for the surcharge disclosure before you enter your payment information. Most legitimate online retailers show any surcharge or convenience fee on the payment method selection screen, before you click "confirm purchase." If a surcharge appears only after you have already committed, that is a red flag.

For recurring bills like utilities or government fees, call ahead and ask whether a surcharge applies for credit card payments. Many of these agencies offer payment plans or alternative payment methods that avoid the fee. Some will waive the fee if you set up automatic payments from your bank account instead.

Frequently Asked Questions

Can a business charge a fee for credit card payments online?

Yes, if they follow the same rules as in-person: disclose the fee before checkout, do not surcharge debit cards, and stay within the card network caps. Online retailers must show the surcharge on the payment method selection screen, not after you have already entered your card number. If you live in a surcharge-ban state, the fee is illegal regardless.

Is a "convenience fee" the same as a surcharge?

Legally, yes — they are both extra charges for using a credit card. The name does not matter. The same rules apply: disclosure before purchase, no surcharge on debit cards, and state bans still apply. Some businesses use "convenience fee" to make the charge sound more justified, but the restrictions are identical.

Can a business charge a fee if I use a credit card to pay a bill by phone?

Yes, and many utility companies and government agencies do. The fee must still be disclosed before you complete the payment, and it cannot exceed the business's actual processing cost (or 5 percent for Amex). If you live in a surcharge-ban state, the fee is illegal. You can usually avoid the fee by paying online, by mail, or by setting up automatic bank account withdrawals.

What should I do if a business charges me a surcharge I think is illegal?

First, check whether you live in a surcharge-ban state. If you do, report it to your state's attorney general office — most have a consumer protection division that handles these complaints. If you do not live in a ban state, you can dispute the charge with your credit card issuer, though they may not reverse it if the surcharge was disclosed and within the legal cap.

Can a business charge different surcharges for different credit cards?

Yes, as long as each surcharge does not exceed what the business pays its processor for that specific card type. Visa might cost 2.5 percent, Mastercard 2.7 percent, and Amex 3.5 percent, so the business can charge different surcharges for each — up to those amounts. The business must disclose which cards have which surcharges before you pay.