When Businesses Can Charge You a Fee for Using Your Credit Card

Yes, it's legal in most situations, but the rules depend on the card type and who's doing the charging

Businesses can charge a fee when you pay with a credit card, but they cannot charge the same fee for all card types. Federal law allows merchants to charge different fees for different cards — for example, charging 3% for a Visa but 2.5% for an American Express. What's illegal is charging a fee just for using a credit card at all, or charging the same flat fee regardless of which card you use. The rules are different for debit cards, which have stricter protections.

The legal landscape changed significantly in 2013 when the Dodd-Frank Act lifted a long-standing ban on credit card surcharges. Before that, merchants couldn't charge you extra for paying with plastic. Now they can — but only if they follow specific rules about how they disclose the fee and which cards they can charge it on.

Key Takeaways

• Merchants can charge different fees for different credit card brands, but cannot charge one flat surcharge that applies to all credit cards equally.
• Any fee must be clearly posted before you complete your purchase, not hidden until after you've committed to buying.
• Debit cards, prepaid cards, and cash cannot be charged a surcharge under federal law, even if credit cards are.
• Some states and cities have their own rules that are stricter than federal law, so a fee legal in one place may be illegal in another.
• Gas stations, restaurants, and online retailers have different rules about when and how they can charge card fees.

The difference between a surcharge and a discount

A surcharge is a fee added to your bill because you chose to pay with a credit card. A discount is a reduction in price if you pay a different way — usually cash or debit. Legally, these are treated very differently, and the distinction matters.

Merchants can offer a discount for paying with cash or debit with almost no restrictions. They can say "cash customers save 5%" and that's legal everywhere. But if they want to charge extra for credit cards instead, they have to follow the surcharge rules, which are much stricter. Some merchants try to blur this line by calling a surcharge a "credit card processing fee" or a "convenience fee," but the legal treatment is the same.

What the federal law actually says about credit card surcharges

Under the Dodd-Frank Act, merchants can charge a surcharge on credit cards as long as the fee does not exceed the merchant's actual cost to process that card. In practice, this means the fee cannot be higher than what the merchant pays to the card network and the bank — typically between 2% and 3% for most cards, though it varies by card type and merchant category.

The law requires the merchant to disclose the surcharge clearly before you agree to the purchase. For in-person transactions, the fee must be posted visibly at the point of sale — on a sign at the register, for example. For online purchases, it must appear before you enter your payment information. If you discover the fee only after you've already typed in your card number, that violates the disclosure rule.

Importantly, the merchant must also notify the card networks (Visa, Mastercard, American Express, Discover) that they are charging surcharges. They cannot simply start charging without telling the networks, even if the amount is legal.

Which cards can and cannot be surcharged

Credit cards can be surcharged. Debit cards cannot. This is the clearest rule in the law, and it applies everywhere in the United States.

Prepaid cards fall into a gray area. Some are treated like debit cards and cannot be surcharged; others are treated like credit cards and can be. The distinction depends on whether the card is linked to a bank account or a stored value system, which is often unclear to the consumer. If you're using a prepaid card and a merchant tries to charge a surcharge, ask whether they're treating it as a credit card or a debit card — their answer will tell you whether the fee is legal.

Cash, checks, and electronic bank transfers (ACH) cannot be surcharged. The surcharge rules apply only to card payments.

State and local rules that override federal law

Several states have banned credit card surcharges entirely, even though federal law allows them. These states include California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. If you live in one of these states, a merchant cannot charge you a surcharge for using a credit card, period.

Some cities have their own rules too. New York City, for example, bans surcharges on all credit cards, even though New York State allows them upstate. If you're shopping in a state or city with a surcharge ban, the merchant must offer the same price whether you pay with credit, debit, or cash.

A few states allow surcharges but cap the amount lower than the federal limit. You can check your state's attorney general website to find the specific rules where you live. The safest approach: if a surcharge seems unreasonably high, ask the merchant what their state's limit is.

How surcharges work at gas stations and restaurants

Gas stations and restaurants have special rules because they handle payment differently than other retailers. At a gas pump, you often pay before the transaction is complete, which makes it harder to disclose a surcharge clearly. Federal law allows gas stations to charge a surcharge at the pump, but only if it's displayed on the pump itself and at the entrance to the station.

Restaurants face a different issue: they often run your card after you've already agreed to the meal price. If a restaurant wants to add a surcharge, they must disclose it on the menu, on the table, or verbally before you order — not after the meal is finished and they're running your card. Some restaurants try to add a "service charge" or "processing fee" to the bill after the fact; this is only legal if you were told about it beforehand.

What happens if a merchant charges an illegal surcharge

If you're charged a surcharge that violates your state's law or the federal rules, you have a few options. First, ask the merchant to remove it. Many businesses don't know the rules and will reverse the charge if you point out the violation.

If the merchant refuses, you can dispute the charge with your credit card company. Contact your card issuer and explain that the surcharge was illegal under your state's law or exceeded the merchant's processing costs. The card company can investigate and may reverse the charge. Keep your receipt and any photos of signage showing the surcharge as evidence.

For larger or repeated violations, you can file a complaint with your state's attorney general or your state's consumer protection agency. These offices track merchant complaints and can take action if a pattern emerges.

Frequently Asked Questions

Can a small business charge more for credit cards than a big retailer?

No. The surcharge limit is based on the merchant's actual processing costs, which are usually similar across business sizes. A small coffee shop and a large chain store pay roughly the same percentage to process a Visa, so they're both limited to roughly the same surcharge amount. However, different card types have different processing costs, so a business can charge different amounts for different cards.

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

Yes, legally they're treated the same way. Whether the merchant calls it a convenience fee, processing fee, or surcharge, the rules are identical: it must not exceed the merchant's actual cost, it must be disclosed before purchase, and it cannot apply to debit cards. The name doesn't change the legal requirements.

Can an online store charge a surcharge that's different from their in-person store?

Yes. Online and in-person transactions have different processing costs — online typically costs more because of fraud prevention and chargebacks. A merchant can charge a 2% surcharge in their physical store and a 3% surcharge on their website, as long as both are disclosed clearly and neither exceeds their actual costs for that channel.

What if the sign showing the surcharge is small or hard to see?

The disclosure must be clear and conspicuous, which means it has to be easy to notice and read. A tiny sign tucked in a corner probably doesn't meet the legal standard. If you didn't see the surcharge clearly posted before you committed to the purchase, you may have grounds to dispute it with your card company.

Can a merchant charge a surcharge on one card brand but not another?

Yes. A merchant can charge 3% for American Express, 2% for Visa, and nothing for Discover, as long as each fee doesn't exceed that card's processing cost and all fees are disclosed. This is one of the few situations where merchants are allowed to treat different cards differently.