Surcharging Credit Cards In Your Small Business: What You Need to Consider

Adding a fee to credit card transactions (known as “surcharging”) became permissible in 2013, as a result of a class action lawsuit against Visa and MasterCard. It’s taken awhile for that information to trickle down, but more and more businesses are aware of it and surcharging is catching on in some locations. Should you join in and start charging customers to use credit cards? Here’s what you need to know.

Rules and Regulations

Surcharging allows you to charge customers to use credit cards to make a purchase. It is prohibited by state law in 9 states, but allowed elsewhere subject to the following rules:

  • Surcharge cannot exceed 4% of the transaction or the cost of processing, whichever is lower
  • Surcharges must be listed as a separate line item on receipts
  • Intent to surcharge must be disclosed to Visa and MasterCard at least 30 days in advance
  • Signage must be posted at entry points and points of sale clearly stating the surcharge
  • Debit cards may not be surcharged (including debit cards “run as credit”)

Additional rules may be imposed by your processing company or the credit card brands. Be sure to check with your processor prior to surcharging.

Visa’s notice of intent to surcharge form can be found here.
MasterCard’s notice of intent to surcharge form is here.

Pros of Surcharging

The benefit to surcharging is that you’ll cancel out the cost of taking credit cards, which can boost your bottom line. Anyone who has taken a credit card at their business knows that the costs for processing transactions can add up quickly. The thought of passing the costs on to customers is appealing to many business owners, especially small businesses with thin margins.

Cons of Surcharging

A study shows that many consumers are adverse to fees to use their cards. A full 64.5% of those surveyed said they would not be willing to pay any fee at all.

If your customer base regularly uses cards, surcharging could negatively impact your overall sales. This surcharging infographic from CardFellow shows which industries typically see high credit card usage, and breaks down consumer opinion on surcharging by age. You can use this information as a starting point to determine if your customers are likely to be put off by surcharging.


When deciding if you should surcharge, there are a few questions to ask yourself:

  • Do your competitors surcharge?
  • How easy is it for customers to go elsewhere to get the same product or service without a surcharge?
  • Do you sell a lot of big ticket items, where a percentage fee will discourage customers?

These three questions are key points to consider. If your competitors don’t surcharge, or if it’s very easy for your customers to go somewhere else to get the same goods or services, you may lose business if you surcharge.

Additionally, a percentage will hit harder for customers making a large purchase (such as TVs and other consumer electronics) and may discourage them from purchasing at your store. If you sell lots of big ticket items, you may find more customer pushback.

Alternatives to Surcharging

Taking credit cards isn’t cheap, but there are alternatives to surcharging. If you’re finding that the costs of accepting cards is eating into your bottom line, consider these options:

  • Find a more competitive processor.
    Many businesses that accept credit cards don’t have the most competitive pricing available. This is particularly true of any business that has “qualified” rates from a processor. Be sure to compare multiple quotes from processing companies to ensure that you’re getting the best deal. A quick search for credit card processing comparison sites can bring up options to help you.
  • Offer a cash discount.
    Instead of surcharging credit cards, you can offer a discount for customers who choose to pay with cash. If you price all of your goods and services with the costs of processing built in, you’ll be able to offer customers a small discount for paying in cash. But if the customer wants to use their card, the costs are already built in.

Whichever route you choose, consider the impact on your customers as well as on your bottom line. If you do decide to surcharge, be sure to keep a close eye on your sales and customer satisfaction to see how the surcharge affects your business overall.

Small Business Sales Should You be Surcharging Credit CardsEllen Cunningham is the marketing manager for CardFellow, the leading provider of credit card processing comparison tools. She spends her days researching and writing about every aspect of credit card processing and answering questions about taking credit cards.

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