Introduction

Credit card processing fees can quietly become a significant operating expense. For example, a business that accepts $50,000 per month in card payments and pays an effective processing cost of 3% is spending roughly $1,500 each month just to collect its revenue. That naturally raises a question many business owners ask: Can I pass the credit card processing fee on to my customers?

In many parts of the United States, the answer is yes, but the rules are more complicated than adding 3% to every invoice. State law, card network rules, the type of card being used, and how the fee is disclosed can all affect whether a surcharge is allowed.

Credit Card Surcharge, Cash Discount, and Convenience Fee Are Different

These terms are often used interchangeably, but they do not mean the same thing.

A credit card surcharge is an additional amount charged because the customer pays with a credit card. A cash discount works in the opposite direction. The business establishes a regular price and offers a lower price to customers who use cash or another qualifying payment method.

A convenience fee is different again. Card network rules generally treat it as a fee connected with using an alternative payment channel, and it has its own requirements. Simply calling a credit card surcharge a “convenience fee” does not make the charge compliant. That distinction matters because a state that restricts surcharges may still allow a properly structured cash discount.

Which States Prohibit or Restrict Credit Card Surcharges?

The rules are not uniform across the country. Some jurisdictions prohibit ordinary merchant surcharges, some allow them only under specific pricing and disclosure rules, and a few have statutes complicated by court decisions.

States Where Surcharges Are Generally Prohibited

As of September 2026, Connecticut, Maine, and Massachusetts generally prohibit private businesses from adding a surcharge because a customer pays by credit card. Puerto Rico also prohibits this type of surcharge. Cash discounts may still be permitted when they are structured and disclosed correctly, but a cash discount is not the same as adding a card fee to a previously stated price.

States With Special Pricing or Surcharge Rules

California: California should not be described as a simple ban. An optional credit card processing fee generally does not have to be included in the advertised price when customers can reasonably avoid it by paying another way. If credit card payment is the only option, however, the fee becomes mandatory and generally must be included in the advertised price. Businesses must also avoid misleading price presentations.

Colorado: Colorado permits credit card surcharges, but it has tighter rules than many states. A business may generally use a surcharge of up to 2% of the transaction or an amount based on the merchant discount fee actually incurred. Required disclosures must be made, the surcharge must appear as a separate line item on the receipt, and it cannot be imposed on cash, check, debit card, or gift card payments. Older summaries sometimes describe Colorado as “in flux,” but current Colorado law clearly permits surcharges within these limits.

New York: A business may charge a higher credit card price, but the customer must see the total credit card price before the sale. A merchant cannot simply advertise a lower price and then add a percentage at checkout. The difference also cannot exceed the business’s actual credit card processing cost.

New Jersey: Credit card surcharges are permitted, but the amount cannot exceed the merchant’s actual cost to process the credit card payment. The amount of the surcharge must be disclosed before the customer incurs the charge.

States With Legal or Enforcement Complexity

Florida: Florida’s statute still contains language prohibiting credit card surcharges, but a federal appellate court held that the law was unconstitutional in 2015. Because the statute remains printed in state law even though the court decision affected its enforceability, businesses should not rely on the statutory language alone.

Texas: Texas statutes also contain restrictions on credit and debit card surcharges, but federal litigation has limited enforcement of the credit card provision. The Texas State Law Library continues to describe the enforceability of the credit card restriction as unclear. Debit card issues should be treated separately.

Oklahoma is another reason businesses should be cautious with older online lists. Its former surcharge prohibition was repealed effective November 1, 2025, so it should no longer be listed as a state with an outright ban.

Card Network Rules Matter Too

State law is only one layer. Businesses that accept Visa or Mastercard also have to follow card network rules.

Visa permits surcharges only on eligible credit card transactions. Visa debit and prepaid cards cannot be surcharged. A Visa surcharge cannot exceed the merchant’s applicable cost of acceptance and is subject to Visa’s maximum cap. Visa also requires appropriate notice to the merchant’s acquirer and customer disclosures.

Mastercard similarly prohibits surcharges on Debit Mastercard and prepaid cards. A Mastercard credit surcharge generally cannot exceed the merchant’s applicable cost of acceptance and is subject to Mastercard’s maximum cap. Mastercard also requires advance notice before a merchant begins surcharging.

This is why a blanket “3% card fee” can create problems. A payment screen may process credit, debit, and prepaid cards through the same interface. The system needs to identify eligible transactions correctly instead of automatically adding the same fee to every card payment.

How to Implement a Credit Card Fee Properly

A surcharge should never feel like a surprise. The cleanest approach is to build the policy into the payment process before the first customer is charged.

1. Confirm the law in every state where the business accepts customer payments.
2. Review the merchant agreement and current Visa, Mastercard, and processor requirements.
3. Calculate the actual cost of credit card acceptance before selecting a surcharge percentage.
4. Make sure debit and prepaid cards are excluded when required.
5. Disclose the fee before the customer authorizes payment, including on estimates, invoices, checkout pages, or payment screens where appropriate.
6. Configure the payment processor so the surcharge is calculated and reported correctly.
7. Test receipts and checkout screens before going live.
8. Review the policy periodically because laws and card network rules can change.

For a service business, the best time to disclose the policy is when the price and payment terms are established, not after the work is finished and the customer clicks “Pay.” Having clear disclosure reduces confusion and gives the customer a meaningful opportunity to choose another payment method.

Do Not Forget the Accounting

Passing along processing costs changes more than the customer-facing invoice. It also affects bookkeeping and reconciliation.

If a customer pays a $1,000 invoice plus an eligible card surcharge, the books should distinguish the amount collected from the customer from the processing fee withheld by the processor. Recording only the net bank deposit can make revenue, surcharge income, merchant processing expense, and accounts receivable harder to reconcile.

A separate general ledger account for merchant processing fees is often useful. Businesses may also track surcharge revenue separately when that detail helps management understand payment costs. Sales tax treatment can vary by jurisdiction, so a surcharge should not automatically be assumed to be taxable or nontaxable.

A card fee policy can also expose a larger pricing issue. If processing costs are materially affecting margins, the business may need to review its underlying prices, payment terms, collection process, or merchant processor rather than relying only on a surcharge.

Is Passing the Fee to the Customer the Right Move?

Legality is only part of the decision. A surcharge can preserve margin, particularly for businesses with large invoices, but customers may react differently to a separate fee than they would to a slightly higher base price.

For some businesses, a clearly disclosed credit card surcharge combined with a no-fee ACH or check option works well. While for others, incorporating payment costs into pricing creates a smoother customer experience. A cash discount may be a better fit where surcharges are restricted.

The strongest approach is one that complies with the rules, reconciles cleanly in the books, and is understandable to the customer before payment is due. Before implementing a fee, businesses should confirm current requirements with their payment processor and, when state law is uncertain or the company operates in multiple jurisdictions, obtain legal guidance specific to the situation.

Need Help Reviewing Your Payment Processing and Accounting Setup?

Contact Volpe Consulting & Accounting to discuss your business accounting and bookkeeping needs. Our team can help you review how credit card processing fees and surcharges are recorded, evaluate the impact of payment processing costs on your financials, and help ensure your bookkeeping accurately reflects fees, customer payments, and merchant deposits.

Disclaimer

This article is intended for general informational purposes only and does not constitute legal, tax, or accounting advice. Credit card surcharge laws, payment processor requirements, and card network rules vary by jurisdiction and may change over time. Businesses should review current state and local requirements, their merchant processing agreements, and applicable card network rules before implementing a credit card surcharge or similar fee. Businesses should consult qualified legal, tax, or accounting professionals regarding their specific circumstances.