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Can You Legally Pass on Credit Card Fees to Customers?
Options for offsetting card processing fees depend on where your business is located.
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Hillary Crawford is a small-business writer at NerdWallet, with a special focus on business software products. Her previous roles include news writer and associate West Coast editor at Bustle Digital Group, where she helped shape news and tech coverage. Her work has appeared in The Associated Press, The Washington Post, Yahoo Finance and Entrepreneur, in addition to other publications. She is based in Traverse City, Michigan.
Ryan Lane is an editor on NerdWallet’s small-business team. He joined NerdWallet in 2019 as a student loans writer, serving as an authority on that topic after spending more than a decade at student loan guarantor American Student Assistance. In that role, Ryan co-authored the Student Loan Ranger blog in partnership with U.S. News & World Report, as well as wrote and edited content about education financing and financial literacy for multiple online properties, e-courses and more. Ryan also previously oversaw the production of life science journals as a managing editor for publisher Cell Press. Ryan is located in Rochester, New York.
Karrin Sehmbi is an editor and content strategist on the small-business team. She has covered small-business software and lending since 2022 and has more than fifteen years of editorial experience in the fields of educational publishing, content marketing and medical news. She has also held roles as a teacher and a tutor.
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If credit card processing fees are cutting into your business’s bottom line, you might charge them to your customers. It's legal for business owners to do this — in most instances. Here are four options for passing along card fees, as well as the rules you should know for each.
Looking for a cheaper credit card processor?
If passing on credit card fees to your customers doesn’t feel right for your business, consider shopping around for a more cost-effective payment processor.
Credit card surcharging lets you charge customers extra when they pay with credit cards. You can't charge more than 3% of the total transaction for Visa and more than 4% for Mastercard. This is supposed to help cover the cost of the business's processing fees.
Just don’t be surprised if card networks try to talk you out of implementing surcharges. After all, it may discourage customers from paying with credit cards.
In reality, though, your most important consideration should be your customer base. How will your customers react to seeing an additional charge at checkout? It’s worth looking into whether your competitors use surcharging. Or you might ask trusted customers for their opinions.
Rules to know if you’re considering this option Rules to know if you’re considering this option
This practice is legal in all states except Connecticut, Maine, Massachusetts and California. Other states allow surcharging. But they may limit the amount. For example, Colorado caps the surcharge fee at 2%. Other states may require you to disclose the total price (including the surcharge) before a customer pays.
Also, surcharging is not allowed for debit cards. That's true even when customers run them as a credit transaction.
You'll need to take major card networks' rules into account too. One rule states that any businesses planning to add a surcharge must notify the card network in writing at least 30 days ahead of time.
Pros
Can help cover the cost of processing fees.
May help improve your bottom line by reducing the amount you pay to the processor.
Cons
Not legal in all 50 states.
May subject your business to random audits by credit card networks.
Could cause customer dissatisfaction.
2. Cash discounting
Cash discounting, or dual pricing, is another option. To do this, you need to advertise two costs. One is the "full" cost for customers paying with a card. The other is the "discounted" price for customers paying with cash.
Rules to know if you’re considering this option Rules to know if you’re considering this option
Unlike credit card surcharging, cash discounting is legal in all 50 states. But like surcharging, there are specific rules you need to follow.
For example, you must clearly list the credit card price for all your customers to see before they make a purchase. You can't list just the cash price and then surprise customers with a higher card price at the cash register.
Pros
Legal in all 50 states.
Customers may be more receptive to a percentage discount (vs. percentage added fee of a surcharge).
May feel more familiar to customers, since it's long been an option at gas stations.
Cons
Likely need to raise prices on all items or services before implementing for it to make sense financially.
Could cause customer dissatisfaction.
May require more effort and resources to accommodate more frequent bank deposits.
3. Convenience fees
Convenience fees charge for the specific payment method used (e.g., online). For example, let's say a business typically accepts payments in person. And it charges a convenience fee for accepting alternative, non-standard payment methods. You might have come across this while buying tickets over the phone or online from a concert venue.
Imposing this fee wouldn’t offset the fees on all credit card transactions. But it helps cover some.
Rules to know if you’re considering this option Rules to know if you’re considering this option
Convenience fee rules may vary by state and locality. But generally, you can’t charge them in a face-to-face environment, according to Visa. The extra fee must also be disclosed before the customer completes their purchase.
Pros
Legal in all 50 states.
May feel more familiar to customers who have bought tickets online before, for example.
Lump sum convenience fee may cover more than the processing fee.
Can be applied to debit card and ACH payments, in addition to credit card payments.
Cons
Doesn’t apply to in-person payments.
Lump sum convenience fee (e.g., $3) may deter customers from making the purchase altogether.
4. Minimum purchase amounts
Businesses might only accept card purchases over a certain amount, like $5 or $10. That's because processing fees for very small purchases can significantly eat into the business's profit. Sometimes, it's enough that the business loses money on the sale.
Unlike the options above, this strategy doesn't involve extra fees. But it does let businesses choose which transactions are worth the processing fees.
Rules to know if you’re considering this option Rules to know if you’re considering this option
States don’t limit the use of minimum purchase requirements like they do surcharging. But credit card networks have their own rules. For example, the minimum purchase amount for Visa cardholders can't be higher than $10.
Pros
Doesn’t impose an extra fee on the consumer.
Easy to implement.
Has less state-specific rules than surcharging, for example.
Cons
Doesn’t offset processing costs for purchases that cost more than the minimum amount.
Payment processors with solutions for passing on credit card fees
NerdWallet's ratings are determined by our editorial team. The scoring formulas take into account multiple data points for each financial product and service.
NerdWallet's ratings are determined by our editorial team. The scoring formulas take into account multiple data points for each financial product and service.
NerdWallet's ratings are determined by our editorial team. The scoring formulas take into account multiple data points for each financial product and service.
Square: Best for small retailers and cafes. Square's free POS software and range of hardware options make it a good fit for lots of small businesses. You can also enable credit card surcharging in its POS system. Read our full Square review.
Helcim:Best for interchange-plus pricing. Interchange-plus pricing can help higher volume businesses save in processing fees. Helcim's fee saver feature lets you implement credit card surcharges to maximize your savings. Read our full Helcim review.
Finix:Best for midsize businesses. Finix takes a more personalized approach to payment processing. This can be especially beneficial for quickly growing businesses. The company allows surcharges and convenience fees too. Read our full Finix review.
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SquareSquare
5.0
NerdWallet rating
NerdWallet's ratings are determined by our editorial team. The scoring formulas take into account multiple data points for each financial product and service.
