Compliant Surcharging
Your Guide to Passing Credit Card Fees to Customers
What is Surcharging?
Surcharging allows merchants to add a fee to credit card transactions to offset processing costs, passing these fees directly to customers. Unlike cash discounting, which offers a discount for cash payments, surcharging increases the price for credit card users. When implemented correctly, surcharging complies with card brand rules (e.g., Visa, Mastercard) and state laws, helping businesses reduce the impact of high interchange fees, especially for premium or rewards cards.
How to Implement Compliant Surcharging
To surcharge compliantly, merchants must follow strict guidelines to avoid penalties and ensure transparency. Key requirements include:
- Card Brand Rules: Notify Visa and Mastercard 30 days before implementing surcharging. Cap surcharges at 3% (or 4% in some cases) and disclose them clearly at the point of sale and on receipts.
- State Laws: Surcharging is prohibited in states like Connecticut and Massachusetts (as of 2025). Check local regulations to ensure compliance.
- Clear Signage: Display surcharge notices at the store entrance and checkout to inform customers before they pay.
- POS Integration: Use a POS system that automatically applies surcharges to credit card transactions (not debit cards) and itemizes them on receipts.
Non-compliance can lead to fines or loss of processing privileges, so partnering with a knowledgeable processor like Upstate Merchant Advocates is crucial.
Surcharging vs. Other Pricing Models
Surcharging is one of several pricing models available to merchants. Here’s how it compares to Interchange Plus and Cash Discounting:
| Pricing Model | Description | Pros | Cons |
|---|---|---|---|
| Surcharging | Adds a fee (capped at 3%) to credit card transactions, disclosed to customers. | Offsets credit card processing costs; compliant when done correctly. | Merchant covers processing costs for Debit Cards as a surcharge CANNOT be applied to Debit Cards per the Wall Street Reform Act of 2010. Prohibited in some states; may deter credit card users. |
| Interchange Plus | Merchants pay exact interchange fees plus a fixed processor markup. | Transparent; saves on low-rate transactions like debit cards. | Merchants bear full processing costs. |
| Cash Discounting | Offers a discount for cash payments, as advertised prices include processing fees. | Encourages cash payments; legal in all states. | Not all payment processors offer Cash Discounting. Square, Stripe, and Toast for example. |
Learn more about Interchange Plus or Cash Discounting to find the best fit for your business.
Why Choose Upstate Merchant Advocates?
At Upstate Merchant Advocates, we help you implement compliant surcharging programs that save money while keeping customers informed. Our expertise ensures you meet card brand and legal requirements, with services including:
- Compliance Guidance: Navigate Visa, Mastercard, and state regulations with ease.
- Cost Savings: Reduce the impact of high interchange fees on premium cards.
- Custom POS Solutions: Seamlessly integrate surcharging into your payment systems.
- Transparent Signage: Provide clear notices to maintain customer trust.
Contact us today to explore how compliant surcharging can benefit your business!
Get Started with Upstate Merchant Advocates