Merchants pay credit card transaction fees. When you swipe, tap, or type your card number, the business accepting the payment gives up roughly 1.5% to 3.5% of the sale to cover processing. In most states, though, the merchant is allowed to shift part of that cost back to you as a disclosed surcharge, and the rules on who pays credit card transaction fees depend on the card you use, the state you’re in, and how the fee is presented at checkout.
How the Fee Reaches the Merchant
A business that wants to accept cards signs an agreement with a payment processor or merchant bank. That contract sets the fee for every transaction. The price you see on the shelf or the screen doesn’t change because of it; the processor simply subtracts its fees before depositing the rest into the merchant’s account, usually within one to three business days. On a $100 sale with a 2.5% total fee, the merchant nets about $97.50.
Card type matters. A basic consumer credit card carries a lower interchange rate than a premium rewards card, because the issuing bank uses the higher rate to fund cashback, points, and travel perks. In practical terms, the merchant absorbs a bigger cost when you pay with a rewards card, and that cost indirectly subsidizes your rewards.
When a Merchant Can Pass the Fee to You
Surcharging credit card purchases became legal for most U.S. merchants after a class-action settlement with Visa and Mastercard took effect on January 27, 2013.1Visa. Surcharging Credit Cards – Q&A for Merchants Before that date, network rules prohibited it outright.
Where surcharging is permitted, a merchant still has to work within limits:
- The surcharge cannot exceed the merchant’s actual cost of processing the transaction.
- Visa caps surcharges at 3% of the transaction, or the merchant’s actual cost, whichever is lower.2Visa. U.S. Merchant Surcharge Q and A
- Mastercard caps surcharges at 4%. A business that accepts both networks and applies a single surcharge effectively has to stay at or below 3%.3Mastercard. What Merchant Surcharge Rules Mean to You
- The merchant must give the networks and its acquiring bank at least 30 days’ notice before it starts surcharging.
- The surcharge must be disclosed before you complete the purchase and appear as a separate line item on your receipt.3Mastercard. What Merchant Surcharge Rules Mean to You
A fee buried inside the total price without any disclosure violates network rules and, depending on where you are, federal and state law as well.
When a Surcharge Is Not Allowed
Debit and Prepaid Cards
Visa and Mastercard both prohibit surcharges on debit and prepaid card transactions. That ban holds even if you select “credit” at the terminal. The selection controls whether the payment runs as signature-based or PIN-based; it doesn’t change what kind of card you’re carrying.2Visa. U.S. Merchant Surcharge Q and A Any surcharge added to a debit card purchase violates the rules.
State Bans and Caps
Individual states can still restrict surcharging. Connecticut and Massachusetts, for example, have enforced outright bans despite challenges to similar statutes elsewhere.4Acquisition.GOV. 6-6. Surcharges Federal courts have struck down or narrowed bans in some other states on First Amendment grounds, holding that the laws restricted how merchants communicate pricing.
A separate group of states allows surcharging but caps the fee below the network maximums, sometimes at 2% or 1%. Others require enhanced disclosure, such as showing the credit card price in dollars and cents rather than only as a percentage. Because state rules change, your state attorney general’s website is the reliable place to check what applies where you shop.
Minimum Purchase Amounts
Federal law lets merchants set a credit card minimum, but only up to $10. A coffee shop that posts a $5 minimum is within the law; a $15 minimum is not.5Office of the Law Revision Counsel. 15 USC 1693o-2 – Reasonable Fees and Rules for Payment Card Transactions Federal agencies and higher-education institutions may also set a maximum dollar amount for card acceptance, provided they don’t discriminate between networks or issuers.
Convenience Fees and Cash Discounts Are Different
A surcharge is tied to the payment method. A convenience fee is tied to the channel: paying online or by phone for a bill you’d normally pay in person, for instance. The FTC requires that any such fee be disclosed before you finalize payment and included in the final amount you see. If the business gives you no alternative payment method, the processing cost has to be built into the posted price, not tacked on separately.6Federal Trade Commission. The Rule on Unfair or Deceptive Fees – Frequently Asked Questions
A cash discount works in the opposite direction from a surcharge. The posted price is the credit card price, and paying with cash gets you a reduction. Federal law protects a merchant’s right to offer this, and card networks can’t stop them. The discount must be available to all buyers and clearly displayed, and the “regular price” can’t be inflated so the discount only brings it back to what it would have been.7Office of the Law Revision Counsel. 15 U.S. Code 1693o-2 – Reasonable Fees and Rules for Payment Card Transactions In states that prohibit surcharges, a properly structured cash discount is still legal, because it reduces the price below the listed amount rather than raising it above.
The FTC’s Rule on Unfair or Deceptive Fees, effective May 12, 2025, targets bait-and-switch pricing. The mandatory provisions currently apply to live-event tickets and short-term lodging, but FTC guidance is clear that businesses passing through card processing fees have to disclose them, include them in the final amount, and describe their purpose accurately. Vague labels like “service fee” without explanation can run afoul of the rule.6Federal Trade Commission. The Rule on Unfair or Deceptive Fees – Frequently Asked Questions
If You Think You Were Improperly Charged
If a merchant surcharges your debit card, exceeds the allowed cap, or fails to disclose the fee before you paid, start with the merchant. Many surcharge errors trace back to a misconfigured point-of-sale system, not intent.
If that doesn’t fix it, you have three routes:
- Report the violation to the card network. Visa and Mastercard both enforce their surcharge rules and can fine merchants.
- File a complaint with the Consumer Financial Protection Bureau online or at (855) 411-2372.8Consumer Financial Protection Bureau. Submit a Complaint
- In a state that bans surcharges, report the merchant to your state attorney general’s office for enforcement under state consumer protection law.
Returns and Surcharge Refunds
When you return something you paid a surcharge on, the merchant should refund the surcharge along with the purchase price. Federal law doesn’t explicitly require refunding the surcharge, but it does require that a merchant who gives cash refunds to cash-paying customers must give a refund (as a credit to your card or as cash) to customers who paid by credit card. Once the merchant processes the return, the card issuer has to credit your account within three business days of receiving the refund notice.9Consumer Financial Protection Bureau. 1026.12 Special Credit Card Provisions If the surcharge isn’t reversed alongside your refund, raise it with the merchant, and if that fails, dispute the charge through your card issuer.