The Reality of a Credit Card Surcharge Fee - Shift Credit Card Processing

The Reality of a Credit Card Surcharge Fee

What is a Credit Card Surcharge?

A credit card surcharge is, to put it simply, an extra charge passed onto customers that use a credit card. Many customers, and even business owners, have no idea that credit card surcharges can be charged. 

Many customers are surprised to see that they were charged more than the marked price for the goods that they bought. They don’t understand why the price charged was different than the price displayed.

Because of the lack of knowledge surrounding surcharging credit cards, this has led many customers and business owners to wonder if charging the surcharge is even legal.

How are Credit Card Purchases Processed?

Credit card issuers give their cards to customers. Customers then purchase a product using the card on a payments system.

The purchase goes through a card network on the merchant account to actually process the purchase. 

Credit card payments, when used at a business that decides to charge a surcharge, will have an additional fee associated with the use of the card to cover the credit card processing fee charged by the processor.

Is it Legal to Add a Credit Card Surcharge?

In forty states, the answer is yes, it is legal to add a credit card surcharge. In all states except Colorado, Connecticut, Kansas, Maine, Massachusetts, and Oklahoma, it is legal to charge surcharges to credit card purchases.

map of where it is legal to add a surcharge

There are, however, strict guidelines that businesses charging a surcharge must adhere to. For instance, merchant surcharges must be at or below 4% of the total price of the sale to be allowable surcharges.

A business can’t just hit you with as big of a surcharge fee as they want at checkout and profit off of the percentage that they charge you. Instead, it has to be the same percentage that they are charged by their processor, at a maximum of 4%.

So, why do some businesses decide to charge a surcharge, and why do others not?

Why is There a Surcharge on Credit Cards?

Some businesses charge a surcharge on credit card purchases to offset the processing cost that they will be charged by their credit card processor.

For instance, issuing banks, the card issuer and credit card processors charge the business a percentage of each purchase to pay for card acceptance. 

To cover this, some businesses will implement surcharges and actually charge cards the same percentage that they are charged per purchase, to basically offset the charge that their credit card processing company is charging them. 

Businesses don’t simply charge a surcharge just so they can pocket a little bit more money on all credit or debit cards transactions. It all stems from the amount that a business is charged just to simply accept payment from credit cards.

Surcharges aren’t fake fees disguised as a convenience fee just to make the business some extra money. 

Prepaid cards and debit cards carry different processing and transaction fees than credit cards. While there can still be surcharges on debit card purchases, from methods like a Visa debit card, they are rarer than credit card surcharges.

Credit cards, because of high rewards credit cards, have higher fees because someone has to pay for the rewards attached to the card. The payment for the rewards come from the processing fee.

Why Are Businesses Charged a Credit Card Processing Fee?

Businesses are charged a credit card processing fee because it is how the processor, issuing bank and the credit card brand make money off of processing the purchases. They take a percentage of each credit card transaction from the business.

That is how they make their money. They continue to make a percentage of each purchase for as long as that business is processing with them.

The average credit card processing company will charge their businesses that extra processing fee on each transaction. Businesses that process with Shift will have much lower or nonexistent fees.

Minimum Purchase Requirement 

When charging surcharges on credit card purchases became legal, so did setting a minimum purchase amount. 

This was created because businesses realized that it became pointless to accept credit cards as a form of payment on purchases under a certain amount. 

This is because with the percentage that a credit card processor will take, in addition to an interchange fee that most processors also charge, the business selling the product and setting the minimum will actually lose money.

With some businesses requiring that credit card purchases meet a minimum value, there are also guidelines in place to protect the customer here. 

The minimum cannot be more than $10, meaning that they must accept your credit card and not upcharge you any additional amount to accept it as long as the total value is $10 or under.

Is There a Way to Avoid Credit Card Surcharges?

Unfortunately for the customer, there is no way to avoid credit card surcharges at businesses that charge them if you want to pay with a credit card.

It is legal in 44 states, besides the ones mentioned above, so there is nothing that can be done for the customer to not pay the upcharge. 

The only true way to avoid credit card surcharges where they’re charged is to prepare to pay with cash.

cash only payment

Many businesses that have not been charging surcharges have found other ways to make up for their losses to credit card processors, however. For example, many businesses would simply raise their prices by the percentage that they were being charged by their processing company.

So, unless the business that is charging the credit card surcharges is breaking any of the surcharging rules above, like charging customers higher than 4% or setting a minimum purchase amount above $10, the surcharge is perfectly legal in 44 states.

If you found that you were charged a surcharge on a purchase and live in one of the ten states where it is illegal, there are ways to submit reports on businesses through either the credit card company getting surcharged or your local government.

While some customers have called for a surcharge ban, it simply won’t happen. The Supreme Courts decision to make surcharges legal ended the possibility of a surcharge ban. The court ruled in favor of surcharges.

Customers must understand that the companies don’t charge a surcharge for extra profit. It is only used to offset the processing fee that their credit card processor charges.

What Happens to the Surcharge I Paid if I Return the Product?

If you return a product that you also paid a surcharge on, the business has to refund the purchase in total, meaning that you will get the amount you paid for the surcharge refunded. 

The customer returning a product receives compensation back for the amount of the surcharge paid originally by the customer.

This is a law in place to provide consumer protections for the customer from businesses that try to take advantage of their customers and the businesses’ right to charge a surcharge.

This laws regarding credit card surcharges are insurance for the customer to know that they are covered in the event that they have to return a product for whatever reason.

The Difference Between Surcharges and Cash Discounts

Surcharges and cash discounts are very similar, but are still different. Surcharges have the customer see the marked price of the product they are buying. 

They take the product to the register and check out. However, they are asked to pay an additional percentage on the product.

Customers hate this because it feels like they’ve been blindsided and lied to by the business. 

This often leads to the customer getting upset with the employee that is handling the purchase or wanting to speak to a manager about why they have been charged more than they thought they were supposed to.

Cash discounts, on the other hand, let customers know that there is a fee charged on all store sales including cash. 

They take the product to the register and check out. They pay the price posted, but only if they are checking out using cash.

If they intend on using cash or a cash check, they will always pay the posted price.

So with a cash discount program, the processing fee still gets passed onto the customer. However, the customer knows they will get a discount for cash.

It is important the merchant is provided the correct signage to inform customers of this cash discount.

This method is usually much better received than the surcharge method because the customer paying with cash gets a discount, while the customer paying with a credit card sees the signage and understands they have to pay a little more. 

Why Don’t Businesses Use a Cash Discount Program Instead?

That is a great question because, unlike a surcharge program, cash discount programs are legal in all 50 states. However, the issue is that many business owners simply don’t know that cash discounting is an option for them.

map of where it is legal to use a cash discount

Being a relatively new concept, a lot of business owners don’t know that there is a better way to offset the actual cost of the processing fees.

 If you’re a business owner that has the option of offering either, and you plan on implementing one of these programs, know that the cash discount program is almost always preferred among customers, because it feels more genuine and honest.

Adding surcharges often lead to complaints and misunderstanding between the customer and business.

From a Customer’s Perspective

As a customer, we totally understand how it feels to have to pay an additional fee. It can be annoying to have to pay more money than you first thought you would have to pay.

We don’t want any extra money to come out of your checking account or savings account either.

But, think about it from the perspective of the business owner that has to pay the processing credit card fees, in addition to common annual fees. Everytime they have to accept a credit card, it is money out of their pockets unless they charge a surcharge or additional fee. 

Sometimes, the surcharge isn’t even enough to cover the processing fee that they have to pay the processor. If the cost to process a certain card, like a high reward card or a business credit card, is higher than what they charge as a surcharge or higher than 4%, they are stuck with paying the rest on their own. 

Nobody wants to pay the extra fees that are charged by the processor. However, somebody has to. The processor needs to get paid for processing credit cards.

From a Business Owner’s Perspective

Card brands, such as a Visa Mastercard or an American Express card, used at payment have to be paid for using their card at the site of purchase. The issuing bank, such as Bank of America, of the credit card that was used for payment needs a share as well.

The collection of contributing members of the credit card payment process make up the card association and network of banks used to process the credit card.

However, the business cannot change what their surcharge was based on which card is being used for payment. All cards, then, must be charged the same surcharge percentage regardless of if the card is qualified or non-qualified.

For example, non-qualified Visa cards will be charged the exact same surcharge percentage from a business as qualified Visa cards.

All customers will be charged the same surcharge percentage, regardless of if the card used was Visa and Mastercards, or even if it was a reward card like a Chase Sapphire Preferred card.

Everybody involved in the credit card payment solutions process needs their share of the total payment processing fee to make it worth their time to even be involved in the process.


No matter if you’re using a credit card or debit card, if the business you are buying from charges a surcharge on credit card purchases, be prepared to pay an additional fee or carry cash instead.

If you’re a business owner trying to decide between a cash discount or a credit card surcharge program, base your top pick around the amount of credit card purchases your business processes per month.

Many other guides to credit card surcharges have an agenda of trying to sell their service. Our guide is here to simply show you what the ins and outs of credit card surcharges are.

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