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Merchant Surcharging – Understanding Payment Card Changes

What is a Surcharge?

A payment card surcharge is a fee that a retailer adds to the cost of a purchase when a customer uses a payment card.

Changes to Surcharging Fees in the United States

Beginning January 27, 2013, merchants in the United States and U.S. Territories will be permitted to impose a surcharge on consumers when they use a credit card.

Historically Visa has not permitted retailer surcharging, but allowing surcharging was a key provision required by merchants to settle long-standing litigation brought by a class of retailers in 2005.

What This Means for Consumers

  • Consumers will pay an additional fee when they use their credit card at retailers that decide to surcharge.
  • Consumers should be aware there are limits to the amount merchants can surcharge. *
  • Retailers are permitted to apply a surcharge to only credit card purchases and cannot impose a surcharge for purchases made using a debit or prepaid card.
  • If retailers intend to impose a surcharge on credit card purchases, they are required to notify customers before customers make an actual purchase at the store entrance and at the point of sale – or in an online environment, on the first page that references credit card brands.
  • Retailers must disclose surcharge fees on every receipt – both in store and online. Carefully review receipts where checkout fees should appear.

Retailers Can Offer a Discount for Cash and Check Purchases

Retailers can encourage their customers to use other forms of payment, such as cash and checks, and can discount for PIN debit and cash and checks.

States Where No Surcharge Laws Protect Consumers

Surcharging isn’t allowed everywhere. Currently, there are laws limiting surcharging in: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Consumers who are subjected to a surcharge or checkout fees in states where they may be prohibited from surcharging may want to report the retailer to their state attorney general’s office.
Click a state below to learn more about surcharging in these locations.

State Laws & Attorney General Contact Information

California

“No retailer…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means…”

Statute: Cal. Civ. Code § 1748.1(a) (West)

Discounts for Cash Payments are allowed in California

“A retailer may, however, offer discounts for the purpose of inducing payment by cash, check or other means not involving the use of a credit card, provided that the discount is offered to all prospective buyers.”

Statute: Cal. Civ. Code § 1748.1(a) (West)

Statutes cover: Credit Cards only

Statute: (Cal. Civ. Code § 1747.02(a) (West) (defining “credit card”))

California State Attorney General – More information

(*external link implies no endorsement by state of California)

Colorado

“[N]o seller…may impose a surcharge on a holder who elects to use a credit or charge card in lieu of payment by cash check or similar means…”

Statute: Colo. Rev. Stat. Ann. § 5-2-212(1) (West)

Discounts for Cash Payments are allowed in Colorado

“Discounts offered to induce payment by cash, check or other means not involving credit card are not finance charges if offered to all prospective buyers and disclosed clearly and conspicuously in accordance with regulations.”

Statute: Colo. Rev. Stat. Ann. § 5-2-212(2) (West)

Statutes cover: Credit Cards only

Statute: (See Colo. Rev. Stat. Ann. § 5-1-301(16), (16.5), (24), (43) (West)).1

Colorado State Attorney General – More information

Connecticut

“No seller may impose a surcharge on a buyer who elects to use any method of payment, including, but not limited to, cash, check, credit card or electronic means…”

Statute: Conn. Gen. Stat. Ann. § 42-133ff(a) (West)

Statute: Id. at § 42-133ff(d).

Statute covers: Credit & Debit

No surcharges on travel agents

”No provider of travel services may impose a surcharge on or reduce the commission paid to a travel agent who acts as an agent for such provider if the buyer uses a credit card to purchase such provider’s travel services.”

Statute: Conn. Gen. Stat. Ann. § 42-133ff(e) (West)

Statute does not define credit card to include debit card

Connecticut State Attorney General – More information

Connecticut Department of Consumer Protection – More information

Florida

“A seller…may not impose a surcharge on the buyer…for electing to use a credit card in lieu of payment by cash, check, or similar means, if the seller…accepts payment by credit card…”

Statute: Fla. Stat. Ann. § 501.0117(1) (West)

Discounts for Cash Payments are allowed in Florida

Discounts offered to induce payment by cash, check or other means not involving a credit card allowed if offered to all prospective buyers.

Statute: Fla. Stat. Ann. § 501.0117(1) (West)

Statutes cover: Statute does not define credit card to include debit card

Statute: Fla. Stat. Ann. § 501.011(1) (West)

Florida State Attorney General ” More information

Kansas

“No seller…or any credit card issuer may impose a surcharge on a card holder who elects to use a credit card in lieu of payment by cash, check or similar means.”

Statute: Kan. Stat. Ann. § 16a-2-403

Discounts for Cash Payments are allowed in Kansas

Attorney General’s opinion interprets section 16a-2-403’s predecessor statute to not prohibit discounts for payments made by cash, check or similar means.

Statute: Kan. Op. Attorney Gen. 86-115, 1986 WL 238345 (1986)

Statutes cover: Statutes do not define credit card to include debit card

Statute: (See Kan. Stat. Ann. §§ 16a-1-301(18), (19))

Kansas State Attorney General – More information

Maine

“No seller…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.”

Statute: Maine Rev. Stat. Ann. tit. 9-A, § 8-303(2) (See also id. § 8-103 (definitions and rules of construction))

Discounts for Cash Payments are allowed in Maine

Discount offered to induce payment by cash, check or other means not involving a credit card not considered a finance charge if offered to all prospective buyers and disclosed clearly and conspicuously.

Statute: See Maine Rev. Stat. Ann. tit. 9-A, § 8-303(3)

Statutes cover: Credit cards only

Statute: (See Maine Rev. Stat. Ann. tit. 9-A, § 1-301(15), (16)).1

Maine State Attorney General – More information

Massachusetts

“No seller…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.”

Statute: Mass. Gen. Laws Ann. ch. 140D, § 28A(a)(2) (West)

Discounts for Cash Payments are allowed in Massachusetts

Discount offered to induce payment by cash, check or other means not involving a credit card not considered a finance charge if offered to all prospective buyers and disclosed clearly and conspicuously.

Statute: Mass. Gen. Laws Ann. ch. 140D, § 28A(b) (West)

Statutes cover: Credit cards only

Statute: (Mass. Gen. Laws Ann. ch. 140D, § 1 (West))

Massachusetts State Attorney General – More information

(*external link implies no endorsement by state of Massachusetts)

New York

“No seller…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means…”

Statute: N.Y. Gen. Bus. Law § 518 (McKinney)

Statute covers: Credit cards only

Statute: (N.Y. Gen. Bus. Law § 511(1))

New York State Attorney General – More information

Oklahoma

“No seller…may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.”

Statute: Okla. Stat. Ann. tit. 14A, § 2-211, -417 (West)

Discounts for Cash Payments are allowed in Oklahoma

Discount offered to induce payment by cash, check or similar means not involving an open-end credit card not considered a credit service charge if offered to all prospective buyers clearly and conspicuously in accordance with regulations.

Statutes cover: Credit cards only

Statute: (See Okla. Stat. Ann. tit. 14A, § 1-301(7), (9), (19)

Oklahoma State Attorney General – More information

Texas

“[A] seller may not impose a surcharge on a buyer who uses a credit card for an extension of credit instead of cash, a check or a similar means of payment.”

Statute: Tex. Fin. Code Ann. § 339.001(a) (Vernon)

Statute covers: Credit cards only

Statute: Tex. Fin. Code Ann. § 301.002(a)(2),(9)

Texas State Attorney General – More information

Visa’s Operating Regulations also continue to prohibit surcharging outside the U.S. unless there is a local law or variance that requires merchants be permitted to engage in the practice.
If you are a retailer and want more information about Visa’s rules related to surcharging, please visit www.visa.com/merchantsurcharging.
And please visit Consumer Action “Know Your Card.”

*Retailers must limit the amount of the surcharge to the applicable merchant discount rate for the credit card transaction surcharged. In cases where the applicable merchant discount rate exceeds 4% of the underlying transaction amount, in no event can the merchant assess a surcharge above 4%.