When Businesses Can and Cannot Charge You Credit Card Fees

What the law actually says about credit card surcharges

It is not illegal for a business to charge you extra for paying with a credit card — but the rules about when and how they can do it are strict, and they vary by state. Federal law allows surcharges in most cases, but about a dozen states ban them outright. Even where surcharges are legal, the business must follow specific rules: they have to disclose the fee before you complete the transaction, the fee cannot exceed what the business actually pays to process the card, and they cannot charge a surcharge on debit cards or prepaid cards.

The confusion comes from the difference between a surcharge and a discount. A surcharge is an extra charge for using a credit card. A discount is a reduction in price for using a different payment method — like cash or a debit card. Legally, these are treated differently, and a business can offer a discount for cash even in states where surcharges are banned.

Key Takeaways

• Federal law permits credit card surcharges in most states, but California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas ban them entirely.
• Where surcharges are legal, the fee cannot exceed the actual cost the business pays to process the card, which is typically 2 to 3 percent.
• A business must tell you the surcharge amount before you pay, not after — this is a requirement under the Dodd-Frank Act.
• Discounts for paying with cash or debit are legal everywhere, even in states that ban surcharges.
• Online retailers must disclose surcharges clearly during checkout; failing to do so can result in fines from the Federal Trade Commission.

States where credit card surcharges are banned

Ten states have laws that prohibit businesses from charging a surcharge when you use a credit card. These states are California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. If you live in one of these states and a business charges you a surcharge for using a credit card, that charge is illegal and you can dispute it.

The bans in these states apply specifically to credit cards. Some states allow surcharges on other payment methods like digital wallets or online payment systems, even though they ban credit card surcharges. The rules can be confusing because they are not uniform — what is banned in one state may be permitted in another.

If you encounter a surcharge in a state where it is banned, you can report it to your state's attorney general office or consumer protection agency. Many of these offices have online complaint forms and investigate patterns of illegal surcharging.

How the federal surcharge rule works

Under federal law, a surcharge is legal as long as it does not exceed the cost the business actually pays to accept the card. When you swipe or tap a credit card, the merchant pays a processing fee to the card network and the bank — this is called the interchange fee or merchant discount rate. For most credit cards, this fee ranges from about 1.5 to 3 percent of the transaction amount, though it varies by card type and the business category.

A business can charge you a surcharge equal to that cost, but not more. If a gas station pays 2.5 percent to process your Visa, it can charge you up to 2.5 percent as a surcharge. It cannot charge 4 percent just because it wants to. This rule comes from the Dodd-Frank Act, passed in 2010, which also requires the business to tell you the surcharge before you complete the payment.

In practice, many businesses do not charge surcharges even where they are legal, because the administrative cost of tracking and disclosing them often outweighs the benefit. Surcharges are more common in industries with thin profit margins, like gas stations or restaurants, or in situations where the transaction is large enough to make the fee worthwhile.

The difference between a surcharge and a discount

A surcharge adds money to your bill for using a credit card. A discount reduces your bill for using a different payment method, like cash or a debit card. Legally, these are treated as opposites, and this distinction matters in states that ban surcharges.

In a state that bans credit card surcharges, a business cannot charge you extra for using a credit card. But it can offer you a discount for paying with cash. The practical effect might look the same — you pay less if you use cash — but the legal framework is different. A discount is a reduction from a stated price; a surcharge is an addition to it.

This is why you might see a sign that says "Cash discount 3 percent" in a state that bans surcharges, but you would not see a sign that says "Credit card surcharge 3 percent." The wording matters legally, even though your wallet feels the same either way.

What businesses must tell you before charging a surcharge

If a business charges a surcharge where it is legal to do so, it must disclose the amount to you before you complete the transaction. This is a federal requirement under the Dodd-Frank Act and the Federal Trade Commission's rules. The disclosure must be clear and conspicuous — meaning you have to actually see it, not buried in fine print or hidden until after you have already paid.

For in-person transactions, the business should display the surcharge amount on a sign at the register or on the payment terminal before you tap or insert your card. For online transactions, the surcharge must appear during checkout, before you confirm your order. If you are calling a business to place an order, they must tell you the surcharge amount before you provide your card number.

If a business charges a surcharge without disclosing it first, you can dispute the charge with your credit card company. Most card issuers will reverse an undisclosed surcharge and may investigate the merchant. The Federal Trade Commission also accepts complaints about undisclosed surcharges and can take action against businesses that repeatedly violate the rule.

Surcharges on debit cards and prepaid cards

Federal law prohibits surcharges on debit cards and prepaid cards, even in states where credit card surcharges are legal. This rule applies to any card that draws directly from a bank account or a stored balance — including prepaid gift cards, payroll cards, and government benefit cards.

The ban on debit card surcharges comes from the Dodd-Frank Act and is meant to protect consumers who may not have access to credit. If a business charges you a surcharge when you use a debit card or prepaid card, that charge is illegal everywhere in the United States, regardless of your state.

If you encounter a surcharge on a debit or prepaid card transaction, report it to your card issuer and to the Federal Trade Commission. These violations are taken seriously because they affect people who may be using debit cards specifically to avoid credit card fees.

What to do if you are charged an illegal surcharge

If you believe you have been charged an illegal surcharge, your first step is to contact your credit card company or bank. Explain that the business charged a surcharge in a state where it is banned, or that the surcharge was not disclosed before you paid, or that it exceeded the merchant's actual processing cost. Most card issuers will reverse the charge and may flag the merchant for investigation.

You can also file a complaint with your state's attorney general office or consumer protection agency. Many states have online complaint forms and investigate patterns of illegal surcharging. If multiple people report the same business, the state may take enforcement action.

For online transactions, you can report the business to the Federal Trade Commission at reportfraud.ftc.gov. The FTC tracks complaints about undisclosed surcharges and uses this information to identify merchants who repeatedly violate the rule. In some cases, the FTC has taken action against large retailers and payment processors for systematic surcharge violations.

Frequently Asked Questions

Can a restaurant charge me extra for using a credit card?

It depends on your state. In California, Florida, New York, and eight other states, no — credit card surcharges are banned. In other states, a restaurant can charge a surcharge if it discloses the amount before you pay and the surcharge does not exceed the restaurant's actual processing cost, typically 2 to 3 percent.

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

Not always. A convenience fee is supposed to cover the cost of a specific service, like paying online or by phone instead of in person. A surcharge is specifically for using a credit card. Some businesses use the term "convenience fee" to describe what is actually a credit card surcharge, which may violate the rules. If you are unsure, ask the business what the fee covers.

Can a gas station charge different prices for credit and cash?

Yes, but only if the difference is framed as a cash discount, not a credit card surcharge. In states that ban surcharges, a gas station can offer a lower price for paying with cash. In states where surcharges are legal, it can charge extra for credit. Either way, the difference cannot exceed the station's actual processing cost.

What if a business says the surcharge is required by their payment processor?

That is not a legal reason to charge you a surcharge. The business is responsible for complying with surcharge laws, regardless of what their payment processor requires. If a processor is forcing a business to charge illegal surcharges, the business should switch processors. You should not pay an illegal surcharge just because a business claims it has no choice.

Can online retailers charge a surcharge for credit cards?

Only if they disclose it clearly during checkout and only in states where surcharges are legal. The disclosure must appear before you confirm your order, not in a confirmation email afterward. Many online retailers avoid surcharges because the Federal Trade Commission actively investigates undisclosed surcharges on e-commerce sites.