July 27, 2023

Merchant Services

Surcharging Laws What You Need to Know

Merchant Services

Surcharging laws govern how merchants can pay processing costs to their customers. Both state governments and card networks set regulations that restrict aspects of surcharges. Once you consider these various laws and regulations, it is also essential that you follow the best practices for surcharging to avoid any errors or fines. 

Surcharging Basics

Surcharging is how merchants pass on the transaction costs of credit card purchases to customers. This applies only to credit card purchases and cannot be applied to debit or prepaid card transactions. Many merchants use surcharges, and many customers are used to paying surcharges. Numerous surcharging laws and regulations are in place to protect customers from merchants and ensure that consumers still use their credit cards

What Surcharging Laws Are There?

Brand Level vs. Product Level

This surcharging law refers to credit card brands and products on which merchants can apply surcharges. A merchant can apply either brand or product-level surcharges but not both. For example, a merchant can decide to surcharge all Mastercard purchases or just a specific type of Visa but cannot do both. 

Other surcharging laws apply to brand-level surcharges. A merchant must use the same surcharge for all cards of that brand no matter who issued it, and the surcharge cannot be more than 3%. Additionally, suppose a merchant accepts cards from multiple card brands. In that case, “level playing field requirements” will need to be followed to ensure no specific card network is discouraged.

Product-level surcharges have similar rules to brand ones. All surcharges must be the same regardless of who issued the product; the surcharge cannot be more than 3%. 

State Legality

For decades surcharging was illegal across much of the US. In recent years most states have legalized the practice and created surcharging laws. For example, some states, like Colorado, have lower caps for surcharges at 2%. Connecticut and Massachusetts, and both still prohibit the use of surcharges along with Puerto Rico. 

Some states, such as New York and Maine, have additional transparency requirements that businesses must follow. Additionally, there are eight states where surcharging is technically illegal, but this is not enforceable due to court decisions. Merchants operating in these states should be aware of any potential court decisions that could make their surcharging illegal again. 


This is a central component of surcharging laws all across the US. Merchants must notify all necessary parties before deciding to implement surcharges. Your payment provider and credit card networks need written notification before a merchant begins surcharging. Some payment providers assist merchants in implementing this process. 

Customers also need to see in writing that a surcharge is being applied to their purchases. They are paying for the transaction cost and need to be aware of this. Transparency ensures that merchants follow surcharging laws and saves merchants and customers headaches from the use of surcharges

Business Type

Most surcharging laws apply only to consumer businesses. Different rules apply to government and educational institutions. These organizations can surcharge even in states where consumer business surcharging is illegal. 

For businesses operating in multiple states, surcharging law only applies to each specific state. As long as the company obeys the surcharging laws in each state, they are free to surcharge in every area they are allowed to. 

Card Network Requirements

On top of surcharging laws from individual states, merchants also need to obey the surcharging rules of card networks. First, a merchant needs to notify their card association and payment provider 30 days in advance in writing, and the surcharge costs merchants can only cover baseline costs. They cannot give the merchant more profits. Brand vs. product surcharges is another essential part of card network requirements. Surcharges also need to be included as separate items on receipts. 

Surcharging Best Practices

Once a merchant learns about all the necessary surcharging laws and requirements, they can implement a few best practices to make the most of surcharging. 

Provide Enough Notice

Be sure to inform all the necessary parties of your intention to begin surcharging. Contact your payment processor to notify them and find where to direct your written notice to the processor and card networks. 

Let customers know ahead of time that you will be implementing surcharges. Once you begin applying surcharges, have a notice at the front of the store or on your website informing them of surcharges. There should be an additional notice at the register or the checkout page on your website. 

Correctly Document Surcharges

Ensure that your payment system is set up to document surcharges on receipts to satisfy card network requirements correctly. This also allows customers to see what part of the purchase cost was due to surcharges. Proper documentation ensures transparency throughout the entire process

Alternative to Surcharging

If managing all these surcharging laws is too much for a merchant, there are other ways to avoid payment processing costs. The most common option is to offer cash discounts to customers. This means customers will pay less if they use cash. It is appealing to many merchants as it results in a discount for customers rather than an additional cost as with surcharging. 

However, with cash discounts, there is no way to guarantee that customers will use cash instead of their credit cards. When customers use their cards, merchants still need to pay processing fees to their payment processors. Additionally, cash may be impractical for certain purchases and merchants. 

Surcharging with Treati

Navigating surcharging laws with Treati is incredibly easy. We are ready to work with you every step of the process to ensure that all the necessary rules and regulations are implemented to protect your business from costly legal action. Our service is designed to be flexible and bring maximum value to your business. 

And if there are better fits for your business than surcharging, ask our team what other options are available to make the most of your payment processing. We are here to provide you with whatever help you need.

Bottom Line

Surcharging laws and regulations can be very complicated, depending on where you do business. With this in mind, having a payment processor that can help you navigate this process is critical.