Ultimate Guide to Credit Card Surcharge Laws By States (Updated for 2025)

A convenience fee is a charge that businesses add when a customer pays through a method that is different from the merchant’s standard form of payment. For example, if a brick-and-mortar store typically accepts in-person cash or card transactions, it might charge a convenience fee for payments made online or by phone. This fee typically covers the additional costs associated with processing these alternative payment methods.

Unlike credit card surcharges—which are calculated as a percentage—convenience fees are usually structured as a flat amount. They often appear for more substantial payments, such as mortgage bills, property taxes, college tuition, and other large transactions. However, they can also be applied to everyday purchases in certain cases.

Yes. In principle, you can charge a convenience fee for credit or debit card transactions ONLY if you can show that cards are not your usual form of payment. In practice, it’s uncommon to see a business apply both a convenience fee and a surcharge at the same time. Although it may be permissible in extremely narrow circumstances, customers who see two separate fees will often have a negative reaction, so most merchants avoid doing so.

Surcharges

• Applicable Only to Credit Cards. Debit card transactions cannot be subject to a surcharge.
• Percentage of the Transaction: Surcharges are calculated as a percentage of the purchase amount, rather than a flat rate.
• Limits on Surcharge Amount: By federal law, surcharges cannot exceed the actual processing cost, which is typically capped at 3% nationwide. In Colorado, surcharges cannot exceed 2%.
• State Restrictions: Surcharges are generally permitted in all 50 states and U.S. territories, except in Connecticut, Massachusetts, and Puerto Rico, where they remain prohibited.

Convenience Fees

• Non-Standard Payment Methods: A convenience fee applies when customers choose a payment option that is not the business’s usual way of accepting funds. For instance, a brick-and-mortar store might apply a convenience fee for phone or online payments.
• Availability of a Preferred Alternative: Businesses can only charge a convenience fee if customers have at least one more common (or “preferred”) way to pay without incurring that fee.
• Typically a Flat Fee: Unlike surcharges, convenience fees are most often charged as a fixed dollar amount rather than a percentage.
• Allowed in All States and Territories: Convenience fees are legal everywhere in the U.S. and its territories.

Customer Notification
Whether you plan to use surcharges or convenience fees, clearly disclose them to customers. They should appear on signage in your store, be displayed at the point of sale, and be itemized on receipts.

Credit Card Network Rules
Visa, American Express, Discover, and Mastercard each have guidelines for how and when you can impose extra fees. Be sure to verify that your fee practices align with any relevant network requirements and state laws.

Not exactly. For years, many small businesses in the U.S. have offered lower prices to customers who pay with cash. Surcharging simply means passing on the cost of accepting credit cards to the customer. Your customers can always choose to pay with a debit card to avoid the credit card surcharge.

Credit card companies charge a fee for each credit or debit card payment processed. Typically, this fee is paid by the business owner. With ODoF Merchant Services, you get compliant signage and equipment to accept credit cards without paying any fees. If a customer uses a debit card, our system will charge you a flat fee of 1% + 25¢ per transaction. Otherwise, Cash is entirely free.

Absolutely. Your daily savings will be significant and your monthly statement will only include debit card processing fees.

Businesses using the surcharge model have NOT reported a drop in sales. Customers have more payment options and can avoid surcharges by using cash or debit cards. With proper marketing, a surcharge program can help increase your annual revenue while reducing expenses.

FSA/HSA cards are treated like regulated debit cards, meaning you cannot add a surcharge to them. Our surcharge-compatible terminal automatically detects the card type from the card number.

If it’s a credit-type FSA/HSA card (Rare), you may add up to a 3% surcharge (as long as you follow all card brand requirements).

If it’s a debit/prepaid FSA/HSA card, no surcharge is allowed, and it will be processed as a debit transaction, with you paying the 1% fee.

If the card is an FSA/HSA card and the cardholder doesn’t know their PIN, our POS terminal will give the option to run the transaction without the cardholder surcharge as a credit transaction (Visa/MasterCard Debit). You will still pay the 1% debit fee.

Please note that not all FSA/HSA debit cards are the same; some banks require a PIN. If that’s the case, have the patient call the number on the back of the card to set it up prior to use. In the worst-case scenario, you can always provide an itemized statement for them to self-submit on their own.

Yes, in 46 states as of 2025. Businesses must display a sign at the point of sale informing customers of the 3% fee on credit card transactions, which they can avoid by paying with a debit card. We provide this signage for you. For full details of state-specific laws, please see article link here

For 2025, generally, yes, you can impose a surcharge on credit card transactions. At the federal level, there is a limit of 4% on credit card surcharges. Debit card surcharges, however, are prohibited in every state.

That said, the following states do not allow credit card surcharges:

• Connecticut
• Maine
• Massachusetts
• California (effective July 1, 2024)

Other states permit surcharging but have specific rules:

• Colorado: Allows credit card surcharges up to 2%.
• New York, New Jersey, Nevada, and South Dakota: Surcharges must not exceed the merchant’s actual cost of card acceptance.
• Texas: Officially bans surcharges but allows convenience fees, service fees, and cash discounts. Federal courts have challenged Texas’s ban.
• Kansas: Anti-surcharge laws exist but have been overturned. Merchants must include credit card fees in the listed price to lawfully implement surcharges.
• Georgia: Permits convenience fees if there are alternative payment methods available.
• Minnesota: Allows surcharging with conditions. Mandatory fees must be included in the advertised price unless the fee can reasonably be avoided by the consumer (effective January 1, 2025).

In the remaining 37 states, surcharging appears to be allowed under most circumstances. However, make sure to consult legal counsel and verify state-specific regulations.