Credit Card Surcharging Laws

Are you tired of eating credit card processing fees that slice into your profit margins? You're not alone. For B2B companies processing large invoice payments and bookkeepers managing multiple client accounts, understanding where you can legally pass these costs to customers can mean the difference between thriving and barely surviving.

The reality is stark: American businesses paid over $160 billion in processing fees in 2022 to accept credit and debit card payments. For a wholesale distributor processing $500,000 monthly in credit card payments at typical rates, that's potentially $15,000 annually in fees that could be legally recovered through surcharging in most states.

But here's where it gets tricky. While federal law permits surcharges, the state-by-state patchwork of regulations creates a minefield of compliance requirements that can result in hefty fines if you get it wrong.

The Current Federal Landscape

At the federal level, credit card surcharging became broadly legal following a landmark 2013 class action settlement between merchants and major card networks. This settlement ended decades of restrictions and opened the door for businesses to offset their processing costs.

However, federal permission doesn't mean anything goes. Major card networks impose their own restrictions:

Visa's Rules: Maximum 3% surcharge (reduced from 4% in April 2023), limited to actual processing costs, credit cards only (never debit), and requires 30-day advance notice to your processor.

Mastercard's Rules: Maximum 4% surcharge, same restrictions on debit cards and cost limitations, with similar notification requirements.

Universal Federal Requirements: All surcharges must be disclosed to customers before the transaction, listed as separate line items on receipts, and cannot exceed your actual processing costs or generate profit.

Where Surcharging Gets Complicated

The challenge lies in state-level regulations that range from complete prohibition to complex conditional allowances. As of 2025, here's the high-level breakdown:

States Where Surcharging is Illegal:

• Connecticut
• Maine
• Massachusetts
• California (as of July 1, 2024, under Senate Bill 478)
• Puerto Rico

States with Special Restrictions:

• Colorado: Capped at 2% maximum
• New York, New Jersey, Nevada, South Dakota: Cannot exceed your actual processing costs
• Texas: Technically prohibited but allows "convenience fees" and "service fees"
• Minnesota: Legal only if customers can "reasonably avoid" the fee (effective January 2025)

States Where Federal Court Decisions Override State Law:

• Florida: State law prohibits surcharging, but federal courts ruled the ban unconstitutional
• Oklahoma: Similar situation with state prohibition overruled by federal courts
• Kansas: Anti-surcharge laws overturned, now legal as of January 2025

The remaining 37+ states generally allow surcharging under federal guidelines, though many have specific disclosure or notification requirements.

Why State Compliance Matters More Than Ever

Getting surcharge compliance wrong isn't just about avoiding angry customers—the financial penalties are severe. According to industry reports, non-compliant merchants face fines ranging from $50,000 to $1 million from card networks, plus potential state-level violations that can cost $500 per occurrence.

Recent enforcement trends show card networks are cracking down harder on violations. Visa has intensified its monitoring of surcharge programs, and several states have passed new consumer protection laws specifically targeting "junk fees" and deceptive pricing practices.

For B2B companies and bookkeepers managing client relationships, compliance becomes even more critical. Your clients trust you to handle their financial processes correctly, and surcharge violations can damage both your reputation and their business operations.

Industry-Specific Considerations

Wholesale Distributors and Manufacturers: Your large-ticket transactions make surcharging particularly valuable, but you're also more likely to trigger compliance reviews. A 3% surcharge on a $50,000 equipment sale recovers $1,500 in processing fees—money that directly impacts your bottom line.

Construction and Contracting: Your industry often operates on thin margins where every percentage point matters. Proper surcharging can be the difference between profitable jobs and break-even work, especially when dealing with large material purchases.

Bookkeepers and Accountants: Managing surcharge compliance across multiple clients in different states requires staying current with changing regulations. You need to understand not just where surcharging is legal, but how to implement it correctly for each client's specific situation.

Best Practices for Implementation

Before implementing any surcharge program, follow these essential steps:

Research Your Jurisdiction: Don't assume federal law applies everywhere. Check both your business location and where your customers are located, as some states apply their rules to out-of-state merchants serving their residents.

Calculate True Costs: Your surcharge cannot exceed your actual processing costs. This includes interchange fees, processor markups, and assessment fees, but typically excludes monthly fees, equipment costs, and other non-transaction expenses.

Implement Proper Disclosure: Every jurisdiction that allows surcharging requires advance disclosure. This means clear signage in physical locations, prominent notices on websites, and verbal disclosure for phone orders.

Set Up Compliant Systems: Your payment processing system must separate surcharge amounts from base transaction amounts in authorization and settlement messages. This isn't just about receipts—it's about how the transaction data flows through the payment networks.

Monitor Ongoing Compliance: Surcharge laws continue evolving. Minnesota just changed its rules in January 2025, and several other states have pending legislation. Regular compliance reviews prevent costly violations.

The Bottom Line

Understanding credit card surcharge laws by state isn't just about legal compliance—it's about protecting your profitability while maintaining customer relationships. For businesses processing significant credit card volumes, proper surcharging can recover thousands of dollars annually in processing costs.

However, the complexity of state-by-state regulations means you can't take a one-size-fits-all approach. What works in Texas may be illegal in Massachusetts, and what's compliant in Florida today may change tomorrow.

The key is staying informed about your specific state requirements and implementing surcharge programs that comply with the strictest applicable regulations. When done correctly, surcharging provides a legitimate way to manage processing costs while maintaining transparency with your customers.

Whether you're a distributor looking to protect thin margins, a contractor managing project costs, or a bookkeeper serving clients across multiple states, understanding these regulations is essential for modern business operations.

For businesses serious about implementing compliant surcharge programs while maintaining excellent customer relationships, partnering with payment processors who understand both federal and state-specific requirements can streamline the process and reduce compliance risks.

Ready to implement a compliant surcharge program that protects your margins without alienating customers? Explore how Nickel's transparent payment processing helps B2B companies manage processing costs while maintaining compliance across all 50 states.

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