Is It Legal to Charge a Credit Card Processing Fee?

Is It Legal To Charge A Credit Card Processing Fee?

A customer pricing notice must be visible to inform customers of the customer service charge when paying with a credit card

This is a great question. With the ever-increasing cost of accepting credit cards, debit cards, and even prepaid cards, this question of is it legal to charge a credit card processing fee is being asked more frequently than ever.

Many business owners have just eaten these credit card fees and consider them just part of the cost of running a business. Now businesses are looking for new ways to cut costs because they are operating with very slim margins.

There are only a couple of ways to charge a processing fee. There are Surcharges, Convenience Fees, and Cash Discount (Service Fee) programs.

We are going to explain the different fee structures so that you as a business owner can make an informed decision.

This will allow you to see the types of fee structures as they appear on this site and others across the web.

So, Is It Legal To Charge A Credit Card Processing Fee?



Is it legal to charge a credit card processing fee, the answer is both yes and no. There are very strict rules when it comes to this subject. 

Let’s take a minute and look at different Visa and Mastercard rules.

First, in 2013, The card-issuing banks decided that business owners would be allowed to add a credit card surcharge of up to 4 percent to all Visa and Mastercard Credit card purchases.

Any Visa Mastercard user can then be expected to pay up to 4 percent extra per credit card purchase.

Second, it is important to note that Debit transactions, as well as all Discover and American Express transactions, were excluded from the surcharge program.

It’s important to compare cards, like the Chase Sapphire Preferred card, and credit card issuers to find which card works best for you.

You can instantly see how this program is ineffective and will never get traction with businesses here in the United States.

Since the surcharge program has been released, many states including: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas have made card surcharges illegal in their states.

To further clear this up, it is important to understand that surcharges on all debit transactions are not permitted in any state.

A card issuer offers lower fees for excellent credit score and higher fees for bad credit scores. Financial institutions, as well as financial advisors, warn against bad credit scores because of the accompanying fees.

Building credit card debt will certainly decrease credit score and result in higher fees.

Download a Zero Fee Case Study!

Learn more about how Zero Fee Processing has actually put money back in the pockets of a real-life business owner.

convenience fees

Convenience Fees

Convenience Fees have been around for some time. This type of fee was introduced to help Mail order/ telephone order (MOTO) and eCommerce companies offset the additional fees because the card and the credit card network is not present in that type of transaction.

This equates to higher annual fees for these businesses than your typical face to face retail merchant.

The credit card convenience fees, however, are not permitted in face to face transactions and is illegal.

This is only an option for businesses that have their products appear and sell online, through catalogs or accept payments over the phone through an alternate payment channel.

service fees
Service Fees

Now, here is an example of how every merchant account or business owner in every state can charge a Service Fee on all transactions, both debit and credit.

By participating in a Cash Discount Program, a merchant will assess a Service Fee at the point-of-sale. You have probably seen this at a Gas Station. The cardholder can choose other payment methods, such as cash, and not be subject to the service fee.

The Service Fee is very clearly stated on the front door as well as the checkout counter. The total purchase amount then, will depend on which form of payment you choose.

It is important to note that the combination of the proprietary hardware/software solution makes it 100% compliant and also serves as the platform to seamlessly manage the cash discount program.

So to answer the question, “Is it legal to charge a credit card processing fee?” The answer is Yes when it is deployed in a very specific and compliant program.

This is currently the fastest-growing way of taking credit card payments and eliminating the fees.

Shift processing delivers a proprietary, turnkey, compliant solution that can eliminate your card processing fees forever.

Service fees are everywhere. The average person pays a service fee nearly every day. For example, if you order a pizza and have it delivered, there is typically a delivery or service fee to have it delivered.

Another example would be loans. Most loans, like personal loans, student loans, or business loans have some sort of service fee attached to them.

Your personal bank account has a balance transfer fee and monthly service fees, whether it’s a savings account or a checking account.

Many pay online brokerages fees on their retirement accounts. Brokers with insurance companies charge a brokerage fee on life insurance.

Car insurers try to get the best brokerage fees they can. The airlines charge extra airline baggage fees. These are all forms of service fees and how they make fees legal.

Real World Examples

Here are some real-world examples of businesses of different types using the service fee program after asking themselves the question, is it legal to charge cards a credit card processing fee?

Real estate agents, upon selling a property, need to get commission somehow, which usually presents itself to the customer as an additional fee. 

We have an auto repair shop here locally that started the Cash Discount (Service fee) program.

They were paying $900 per month in credit card processing fees to their credit card processors. After getting on the new program, they now pay $0 in credit card processing fees and they could not be any happier.

The best part is that their customers are happy to pay the small service fee so that they can continue to bring their car to a mechanic that they trust.

Most importantly the repair shop was able to keep their hourly repair rate at the same amount. This made the customers very happy.

Another example of a satisfied customer is a restaurant that we began working with 6 months ago. They were paying $650 per month in credit card processing fees.

Now after implementing the Cash Discount program, they pay $0 in credit card processing fees. Their customers understand that credit card payment processing is a major cost for retailers, and don’t mind paying just a little bit more to ensure that their favorite restaurant is able to keep their doors open.

For whatever reason, if they do not want to pay just a little bit more, they can always consider an alternate method of payment, like cash.

This very same restaurant referred us to a friend who owns a liquor store. This liquor store was paying over $2000 per month in credit card processing fees.

By adding the small service fee to each transaction, they will save over $24,000 over the next twelve months and bring their personal transaction fees down to $0.

Minimum Transaction Amounts

It is important to note that there is another way to offset credit card processing fees.  You can set a minimum credit card transaction amount on all credit and debit card transactions.

This begs the question, is it legal to charge a credit card processing fee? 

This is legal and allowed in all 50 states.

There is a good chance that you have seen this in businesses in your area.

A convenience store may have a $5 minimum purchase amount to use a credit or debit card as a form of payment.

This is a growing trend but does not lower the cost of your monthly card processing fees. It really only protects you from losing profit on small transactions.

This is legal and the law will not prohibit merchants from this method, but it is just not really effective in the big picture.

Is it Legal to Charge a Credit Card Processing Fee?

Is it legal to charge a credit card processing fee?


There are three different ways to legally charge a processing fee; Surcharges, Convenience Fees, or Cash Discount (Service Fee) programs.

Business owners need to decide what is best for their business.

Service Fees are the fastest-growing program for legally charging the customer’s credit card a processing fee.

It is up to you as a business owner to decide whether or not to add a fee or surcharge to your card transactions. 

At this point, as a business owner, you must accept credit cards in your business. With the right service fee partner, you can accept credit cards for free.

I caution you to take careful consideration when deciding on whether to add a service fee because, if it is not executed properly, then you could be leaving your business open to expensive chargebacks from things like cash back credit cards with very high rates.

Make sure that you partner with credit card companies that are compliant and gives you all to tools needed to run a successful and compliant program.

Free merchant services through a service fee program is a great way to eliminate hundreds and even thousands of dollars in fees every month.

Leave a Comment:

MIKE says January 16, 2020

i set up an appointment over the phone at my auto shop when it came time to pay my bill they said they charge a 4 % service fee unless i pay in cash . wheni made the appt there was no mention that they charge these fees now so i had to pay with my creditcard to get car released it may be legal but thats deceptive on owners of auto shop not telling me upfront

    Shift Processing says January 31, 2020

    Mike, You’re totally right. In order for a cash discount program or a surcharge program to fall within program guidelines, signage must be placed at specific places inside the store to notify customers of the program. If there isn’t any signage, then the program isn’t being operated correctly. For each of our customers, we provide signage and send these signs to them before they’re allowed to operate the program. They are located on the door where customers enter and placed around the register to notify customers before any purchase or arrangement is made for services. For any appointments set up over the phone, it should have been mentioned as a part of any arrangements. Cash discount or surcharge processing should never be a surprise for the customer, as the programs are set up to give multiple opportunities for the consumer to learn about them before making a purchase. Sorry you had this experience, and it shouldn’t be that way.

Mo says January 16, 2021

How do any of these options apply to those of us who use payment apps (PayPal, vinmo, etc.)? We still get charged but not through a card service. -Btw: I worked with a merchant services co that was great at first. Then, over time, they began to charge me ridiculous amounts to use THEIR services. I lost more $$ by using them…

Add Your Reply