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How Businesses Can Use Credit Card Surcharging to Save Money

What Is Credit Card Surcharging?

Many U.S. businesses are concerned about the cost of accepting credit cards, which often requires a fee of around 2.7% per transaction. Some businesses want to charge an extra fee to consumers to cover this cost. This type of surcharge was prohibited by Visa and Mastercard until new rules emerged in 2013 that allowed businesses to pass on the fees of accepting credit cards to cardholders as a surcharge.

A surcharge is a fee added to the listed price for a good or service when a credit card is used for the purchase (not a debit or prepaid card). A surcharge cannot exceed the cost to accept credit cards, or the surcharge cap of 4%. Surcharging can allow some businesses to have zero processing costs for credit card purchases.

Why Do Businesses Surcharge & What Does it Look like?

Recouping the fees for processing credit cards is the driver for surcharging. The next two sections provide an example of what a typical surcharge rate would be, and what a business might save if they implement surcharging.

What is the average surcharge rate?

As previously noted, a business must not apply a surcharge that exceeds the cost to accept credit cards, making the surcharge “revenue neutral.” According to The Strawhecker Group’s (TSG) Acquiring Industry Metrics (AIM) platform, a business with ~$200,000 in annual credit and debit card sales has an average cost of acceptance of 2.7% (though surcharging can only be applied to credit card purchases). As such, in a bundled pricing scenario, a surcharge of 2.7% allows a business this size to cover their cost of credit card acceptance.

What is the average reduction in a business’s annual cost of card acceptance due to surcharging?

Assuming at least half of a business’s sales are on credits cards (which would be $100,000 per year using the insights above) and the business paid 2.7% for card acceptance, the business paid ~$2,700 in fees for credit card acceptance. If surcharging was appropriately applied to a business that fit the figures listed above, that business could save an average of ~$2,700 per year.

What Does Surcharging Look Like?

For a surcharge, the listed sales price is the same as the sales price charged, but at the register, the business charges an extra fee as a surcharge for credit card transactions. This is called a “merchant fee.” The surcharge must be shown on the receipt in dollars and cents. The table below compares a transaction without a surcharge, and a transaction with a surcharge.

Example Credit Card Transaction
Without a Surcharge
Example Credit Card Transaction
With a Surcharge
Transaction Amount: $100.00 Transaction Amount: $100.00
Merchant Fee (Surcharge): None Merchant Fee (Surcharge): $2.70
Card Processing Fee (Discount Rate): 2.70% Card Processing Fee (Discount Rate): 2.70%
Total Charged to Consumer: $100.00 Total Charged to Consumer: $102.70
Net Cost of Acceptance to Business: $2.70 Net Cost of Acceptance to Business: $0.00
Total Funded to Business: $97.30 Total Funded to Business: $100.00

For illustrative purposes only. There may be multiple variations and/or technical abilities when applying the merchant fee either before or after tax.

Managing Friction Points with Consumers

A surcharge may cause friction among consumers, but certain approaches could help. TSG’s Market Intelligence team interviewed an owner of a small restaurant regarding surcharging. The owner stated that surcharging would create an additional friction point with customers that would need to be managed. The owner felt that communication would be the hinge point for a successful surcharging program and ensuring a consistent message from every employee would be necessary.

The following items outline possible consumer friction points related to surcharging, as well as recommendations on how businesses can handle these potential issues.

Friction Point: The Extra Cost for Using a Credit Card

  • Businesses should make the customer feel empowered and help them understand why surcharging is being used. The message to customers should be focused on how the customer benefits. The message should be kept concise and informative. Customer interaction time is limited.
    • Example: “If you pay with a debit card, prepaid card or cash, there is no additional charge. If you pay with a credit card, a merchant fee will be added to cover the cost of credit card acceptance.”
  • For repeat customers, there will be an initial education period; however, the need to continually educate regular customers will decrease.
  • For new customers, businesses should continue to use consistent and concise messaging.
  • Generally, as surcharging becomes a more common practice, consumers will be become used to surcharging.

Friction Point: Surcharging Incorrectly

  • Some consumers may have experienced businesses that did not following correct surcharging policy, such as applying an exorbitant surcharge that surpasses the 4% cap or if surcharging was done on all payment methods.
  • Businesses should understand surcharging rules, stay compliant, and educate their employees. (Businesses should refer to the Rules & Regulations section of this article for more details and reach out to their payment processing provider as needed).

Friction Point: Lack of Education & Signage

  • Poor communication on surcharging can cause negative or incorrect assumptions. Transparent, consistent messaging is critical. Businesses should create a standard, compliant message used by all employees.
    • Follow card brand signage and notification rules. Signage can prepare consumers ahead of the transaction and can assist employees with their communication efforts.
    • Create a talk track for employees and train the team to navigate conversations with customers – specifically around common customer concerns or comments.
    • Utilize multiple communication channels to share and educate customers about surcharging – verbal, written, social media, website and review sites, for example.
    • If the initial messaging is not reducing customer friction, adapt the message. Businesses should pivot until the messaging is honed and suited to their specific customer base. Businesses know their customers best.

Essentially, receiving an extra fee for paying with a credit card is a main concern for consumers when it comes to surcharging. Businesses should use clear, consistent, and frequent communication to educate consumers and manage friction points early in the purchase process.

Rules & Regulations Around Surcharging

There are specific details from the card brands that dictate how to surcharge compliantly:

  • A business must comply with federal and state laws. Certain states have laws that limit or prohibit surcharging.
  • The business must notify card brands 30 days prior to implementing a surcharge.
  • A business may only surcharge credit cards, not debit or prepaid cards under any circumstance.
  • A business must disclose the surcharge as a merchant fee in all sales channels used (in-store, online, mail, phone and unattended).
  • Customers must be notified of the surcharge at the point of entry, point of sale or transaction, and on their receipt. The card brands have very specific signage requirements around messaging, including font type and font size, for example.
  • The business must not apply a surcharge that exceeds the cost to accept credit cards, making the surcharge “revenue neutral.”  The surcharge may not exceed the surcharge cap of 4%.
    • The cost of accepting the credits cards is considered the “merchant discount rate” which may not include all the fees charged to the business.
    • The business is responsible for calculating the allowable surcharge amount and reviewing the surcharge rate periodically to ensure compliance.
  • Surcharging is allowed across all business types.

Surcharging Varies State-by-State and Some States have Limitations.

Ten states have laws that limit surcharging; however, these laws were declared unconstitutional or deemed unenforceable in three of these states. This landscape will likely further change and/or become more nuanced. Businesses in these states should learn more about the limits that have been applied to their state.

States that Limit or Regulate Surcharging

  • Colorado
  • Connecticut
  • Kansas
  • Massachusetts
  • Oklahoma

States that Require Additional Disclosures

  • Maine
  • New York

States that have “No Surcharge” Laws that were Declared Unconstitutional or Deemed Unenforceable

  • California
  • Florida
  • Texas


Whether or not to surcharge is an individual decision that needs to be evaluated carefully by any business considering this type of program. Businesses need to think about the impact to their operation; financially, and on their customers.

A business needs to conduct its due diligence by reading and understanding the federal and state laws and card brand rules. A business that has conducted their due diligence and decides to surcharge should also find a trusted payment processing partner that will help them implement a compliant program. A reputable payments partner is critical.

Sources: TSG’s institutional knowledge, research, and analysis, TSG’s AIM database of 3.7 million card-accepting businesses, small business interview, Visa, Mastercard