Is it legal to charge a credit card surcharge?

Short answer: Yes, in most of the United States, it is legal for merchants to charge a credit card surcharge, also known as a "checkout fee" or "swipe fee," but there are specific rules and disclosure requirements they must follow.

In the United States, charging a credit card surcharge is generally legal, provided certain conditions are met [S1, S2]. These charges are intended to help merchants offset the processing fees they pay to credit card companies and banks for each transaction.

Legal Framework

The ability for merchants to charge surcharges largely stems from a 2013 class action settlement involving merchants and major credit card networks (Visa, Mastercard) [S3]. This settlement allowed U.S. merchants to add a surcharge to credit card purchases. Prior to this, credit card network rules often prohibited surcharging, although some state laws also played a role [S3].

State Laws and Restrictions

While federal law doesn't prohibit surcharges, a handful of states have specific laws restricting or prohibiting them. As of late 2023, only Connecticut and Massachusetts have outright bans on credit card surcharges, effectively making them illegal in those states [S4, S5]. Other states, like Colorado, have specific limitations on the amount that can be charged [S6].

Disclosure Requirements

For merchants in states where surcharging is permitted, there are strict disclosure rules that must be followed:

Clear Notification: The surcharge amount or percentage must be clearly disclosed to the customer before the transaction is completed [S1, S7]. This often means visible signage at the point of entry and the point of sale, and disclosure on online checkout pages.
Surcharge Limit: The surcharge cannot exceed the merchant's actual cost of accepting the credit card, and in no case can it exceed 4% [S1, S7]. Many credit card networks limit this to a maximum of 3% or 3.5% [S8].
Specific to Credit Cards: Surcharges can only be applied to credit card transactions. Debit card transactions, even those processed as credit, generally cannot be surcharged [S1, S7].
Itemized on Receipt: The surcharge must be clearly itemized as a separate line item on the customer's receipt [S1].

Failure to comply with these rules can result in penalties for the merchant and the potential for customers to dispute the charge.

What to do:

Check your state's laws: If you are unsure, search for "[Your State Name] credit card surcharge law" to see if your state prohibits or restricts surcharges.
Look for clear disclosure: Always check for signage or online notifications about surcharges before making a purchase.
Review your receipt: Verify that any surcharge is itemized separately and does not exceed the allowed percentage (typically a maximum of 4%).
Use alternative payment: If you want to avoid a surcharge, consider paying with a debit card, cash, or an automatic clearing house (ACH) transfer if the merchant offers these options, as surcharges typically only apply to credit cards.
Report violations: If you believe a merchant is illegally charging a surcharge or failing to disclose it properly, you can report them to your state's Attorney General's office or consumer protection agency, as well as the credit card network (Visa, Mastercard) [S9].

Sources

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