What merchants are allowed to charge

Merchants can charge you a fee for using a credit card, but only under specific conditions set by federal law and card network rules. The key rule: they can charge a fee, but they cannot charge different fees to different customers based on which card you use. They also cannot charge a fee for using a debit card, and they cannot charge a fee that exceeds their actual cost to accept the card.

The law that governs this is the Dodd-Frank Act, passed in 2010. It says merchants can impose a "surcharge" — an extra fee — on credit card transactions, but the surcharge cannot be larger than the cost the merchant actually pays to accept that card. In practice, that cost is usually between 2% and 3% of the transaction amount, depending on the card type and the merchant's processing agreement.

Visa, Mastercard, American Express, and Discover each have their own rules about surcharges on top of federal law. Most require merchants to disclose the surcharge clearly before you complete the purchase, and some prohibit surcharges on certain card types (like corporate cards or prepaid cards). A few states — California, New York, Texas, and Illinois — have additional restrictions that sometimes prohibit surcharges entirely or require them to be disclosed differently.

Key Takeaways

  • Merchants can charge a surcharge on credit cards as long as it does not exceed their actual processing cost, usually 2% to 3% of the transaction.
  • A merchant cannot charge different surcharge amounts to different customers or charge a surcharge on debit card transactions.
  • The surcharge must be clearly disclosed before you complete the purchase — not hidden in fine print or added after the fact.
  • Some states and card networks have stricter rules; California, New York, Texas, and Illinois limit or prohibit surcharges in certain situations.
  • A "convenience fee" for paying by phone or online is different from a surcharge and is treated separately under the rules.

The difference between a surcharge and a convenience fee

A surcharge is a fee added to the price of a transaction because you chose to pay with a credit card instead of cash or another method. A convenience fee is a fee for using a particular payment channel — like paying by phone instead of in person, or online instead by mail. The rules are different for each.

Surcharges are limited by the Dodd-Frank Act and card network rules. Convenience fees are not. A merchant can charge you a convenience fee for using a phone line or website to pay, and that fee can be higher than their actual processing cost. However, the fee must still be disclosed clearly before you pay, and you must have the option to pay without the fee using a different method (like paying in person).

In practice, you will see convenience fees most often at government offices, utility companies, and ticket sellers. A county tax assessor might charge 2.5% to pay online but accept payment by mail for free. A concert venue might charge $5 to buy tickets by phone but allow you to buy them in person without a fee. These are legal as long as the alternative payment method exists and is actually free.

How to spot a surcharge before you pay

Merchants are required to disclose surcharges before you complete the transaction. At a physical store, the disclosure must be visible at the point of sale — on a sign at the register, on the receipt terminal, or on the counter. Online, it must appear before you enter your card number, usually on the checkout page or in a summary of charges.

The disclosure must state the surcharge amount or percentage clearly. It cannot be buried in terms and conditions or mentioned only after you have already paid. If a merchant charges a surcharge without disclosing it first, that is a violation of federal law and the card network rules, and you can dispute the charge with your card issuer.

If you see a surcharge disclosed and you do not want to pay it, you have the right to walk away or use a different payment method if one is available. Some merchants offer discounts for paying with cash or debit instead, which is legal and different from a surcharge on credit cards.

State-by-state rules that override federal law

Four states have laws that restrict or prohibit credit card surcharges beyond what federal law allows. California, New York, Texas, and Illinois each have their own rules, and if you live in or are shopping in one of these states, the state rule applies instead of the federal rule.

California prohibits surcharges on credit card transactions entirely. Merchants cannot charge a surcharge for using a credit card, though they can offer a discount for paying with cash. New York also prohibits surcharges on credit cards. Texas prohibits surcharges on credit cards but allows them on debit cards. Illinois prohibits surcharges on credit cards and debit cards.

If you are shopping online or by mail from a merchant in another state, the merchant's home state law usually applies. If you are shopping in a store in one of these four states, that state's law applies regardless of where the merchant is based. If you are charged a surcharge in a state that prohibits it, you can dispute the charge with your card issuer and report the merchant to your state's attorney general.

What card networks say about surcharges

Visa, Mastercard, American Express, and Discover each publish rules for merchants about surcharges. These rules are stricter than federal law in some cases. For example, Visa and Mastercard prohibit surcharges on certain card types, like corporate cards, purchasing cards, and prepaid cards. American Express historically prohibited surcharges entirely, though that rule changed in 2013.

All four networks require merchants to disclose surcharges clearly and to limit them to the merchant's actual cost to process the card. They also prohibit merchants from charging different surcharge amounts to different customers based on the card type — a merchant cannot charge 3% for Visa and 2% for Mastercard, even if their processing costs differ slightly.

If a merchant violates a card network's surcharge rules, the network can fine the merchant or revoke their ability to accept that card. If you believe a merchant is violating these rules, you can report it to the card network through your card issuer.

How to dispute a surcharge you think is illegal

If you believe a merchant charged you a surcharge that violates federal law, state law, or card network rules, you can dispute the charge with your credit card issuer. Contact the issuer by phone or through your online account and explain that the surcharge was not disclosed before you paid, exceeded the merchant's actual processing cost, or violated your state's law.

The issuer will investigate the charge by contacting the merchant and reviewing the transaction record. If the issuer agrees that the surcharge was improper, they will reverse the charge and credit your account. This process usually takes 30 to 60 days. In the meantime, the charge will be removed from your balance while the investigation is ongoing.

You can also file a complaint with your state's attorney general or the Consumer Financial Protection Bureau (CFPB) if you believe the merchant is systematically charging illegal surcharges. The CFPB accepts complaints online at consumerfinance.gov.

Surcharges on online and phone payments

Surcharges on online and phone payments are treated as convenience fees, not surcharges, in most cases. A merchant can charge a convenience fee for paying by phone or online if they also offer a free payment method — like paying in person or by mail. The convenience fee can be higher than the merchant's actual processing cost.

However, if a merchant calls it a "surcharge" and charges it on all credit card transactions regardless of the payment method, it must follow surcharge rules and cannot exceed the merchant's actual processing cost. The name the merchant uses matters less than what the fee actually is.

If you are paying a bill online and see a fee, check whether you can pay the same bill by mail or in person without a fee. If you can, the fee is likely a convenience fee and is legal. If the merchant charges the same fee for all payment methods, it is a surcharge and must comply with surcharge limits.

Frequently Asked Questions

Can a gas station charge me a surcharge for using a credit card at the pump?

Yes, if the surcharge is disclosed clearly and does not exceed the station's actual processing cost. The disclosure must be visible at the pump or at the entrance. Some states prohibit this entirely — check your state's rules. If you do not see a disclosure, the surcharge should not be charged.

Is a "service charge" the same as a surcharge?

Not always. A service charge is a broad term that can mean different things. If it is a fee added because you used a credit card, it is a surcharge and must follow surcharge rules. If it is a fee for a service the merchant provides (like delivery or table service at a restaurant), it is not a surcharge and is not limited by the same rules. Check the merchant's disclosure to understand what the fee covers.

Can a restaurant add a surcharge to my bill if I pay with a credit card?

Yes, if the surcharge is disclosed before you order and does not exceed the restaurant's actual processing cost. The disclosure must be visible on the menu, at the entrance, or on the table. Some states prohibit this — check your state's rules. A tip is separate from a surcharge and is not subject to the same limits.

What if a merchant charges a surcharge that is higher than 3%?

That violates federal law if the merchant's actual processing cost is lower. You can dispute the charge with your card issuer and report the merchant to your state's attorney general or the CFPB. Processing costs vary by merchant type and card network, so 3% is a typical range, not a hard limit — but the surcharge cannot exceed what the merchant actually pays.

Can a merchant charge a surcharge on a debit card?

Federal law allows surcharges on debit cards, but some states prohibit them. Check your state's rules. If your state prohibits surcharges on debit cards and you are charged one, you can dispute it with your card issuer or report it to your state's attorney general.