Warning: Credit Card Surcharges Start Sunday!

cut cards

Beginning January 27, merchants in the United States (and U.S. Territories) will be permitted to charge so-called “payment card surcharges” or “checkout fees” when customers use credit cards to purchase everyday items.

This is a HUGE deal because prior to a class action settlement reached last July with merchants, such practices were deemed illegal, even though you may have come across select merchants that charged the fees anyway.

Now, thanks to Visa and MasterCard ruffling the feathers of merchants with costly interchange fees, the buck might be passed on to consumers.

Come Sunday, if a retailer decides to impose the fee, they can do so, though there are some limitations.

Know the Rules of Surcharging


First off, merchants need to make very clear that they charge fees for credit card use.

In order to satisfy such requirements, they must post disclosures (signs) at store entry points (or websites) and at point-of-sale locations.

Additionally, the surcharge amount must be on every receipt (offline and online), so customers know how much they were charged for using a credit card.

The fee cannot exceed 4% of the underlying transaction. Moreover, the surcharge cannot exceed the cost of credit card acceptance. In other words, they can’t profit directly off this rule.

And a merchant will only be able to charge the fee if they have the capability of doing so for all types of credit cards. Otherwise they could technically incentivize the use of say an American Express or Discover credit card instead. Visa and MasterCard would likely frown upon that.

However, merchants have the ability to apply the surcharge at the “product level” of certain Visa or MasterCard credit cards, such as Visa Traditional, Visa Traditional Rewards, or Visa Signature.

So the fee could vary based on the type of credit card you have, though that remains to be seen.

Exclusions to the Credit Card Surcharge

While this is big, big news, it’s not applicable to residents in all 50 states.

Fortunately, 10 U.S. states are exempt from the new credit card surcharging rule, including:

– California
– Colorado
– Connecticut
– Florida
– Kansas
– Maine
– Massachusetts
– New York
– Oklahoma
– Texas

Additionally, merchants cannot charge the fee to those who pay with debit cards or prepaid credit cards.

That includes those who use a debit card and select “credit” on the point of sale terminal.

Note: Merchants are currently allowed to offer discounts to consumers who DO NOT use credit cards in places like California.

Will Merchants Charge the Fees?

cost of acceptance

(the chart above details possible surcharge fees that could be levied on consumers)

You also have to wonder if merchants will actually impose the credit card surcharges. It sounds like a lot of work to implement.

And it’s certainly not a great way to drum up business, seeing that most consumers use credit cards nowadays.

Additionally, as I’ve noted time and time again, the cost of credit card use is ALREADY factored into the final price of the goods and services we buy.

So this would essentially result in a double-charge for those opting to use credit, which makes you wonder if this is the death of the credit card.

It may also propel the popularity of prepaid credit cards, such as the recently launched Bluebird from American Express.

For the record, Visa and MasterCard seem to think that merchants won’t charge the fees, as they believe it would turn customers off. Let’s hope so…

Read more: Credit cards vs. paying with cash.

By Colin Robertson

Colin created this blog after spending several years in a job that required him to scour credit reports on a daily basis. His goal is to help individuals better understand their credit and get the most out of credit cards.


  1. Does any large company actually surcharge, or are they just able to? The only companies I ever see surcharge are mom and pop shops, which did so even before it was legal…

  2. Haha…so true. I haven’t seen or heard of any surcharging customers. Doesn’t sound like a good way to drum up business. Easier just to charge a tiny bit more per product and build it in without any noticing.

  3. I haven’t come across any merchant that imposes surcharges for credit card transactions. But my guess is that it’s being tested in smaller markets for a possible full scale rollout at some point in the future.

Leave a comment

Your email address will not be published. Required fields are marked *