Merchants can charge a credit card fee in most states, but federal law and card network rules set specific limits on how they do it
Whether a business can charge you a fee for paying with a credit card depends on three things: your state's laws, the card network's rules (Visa, Mastercard, American Express, Discover), and how the business structures the charge. Federal law does not ban credit card fees outright. Instead, it prohibits surcharges — which means a merchant cannot add a percentage or flat fee on top of the advertised price specifically because you chose a credit card. However, many states have their own rules that are stricter, and card networks themselves prohibit surcharges in their merchant agreements.
The practical result: a business can offer a discount for paying cash or debit, but it cannot legally charge you extra for using a credit card in most situations. The difference matters because one is framed as a reduction from the regular price, and the other as a penalty for your payment method.
Key Takeaways
- Federal law bans surcharges (extra fees added because you use a credit card), but permits discounts for other payment methods like cash or debit.
- Ten states — California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas — have their own laws that ban or restrict credit card surcharges beyond the federal rule.
- Visa, Mastercard, American Express, and Discover all prohibit surcharges in their merchant agreements, even in states where state law does not.
- A business can charge a fee if it is framed as a convenience fee, processing fee, or service charge that applies to all payment methods equally, not just credit cards.
- If you are charged an illegal surcharge, you can dispute it with your card issuer or report it to your state's attorney general.
What the federal ban on surcharges actually covers
The federal rule comes from the Credit Card Accountability Responsibility and Disclosure Act (CARD Act), passed in 2009. It says a merchant cannot impose a surcharge on a cardholder for using a credit card. The law defines a surcharge as a fee that would not be imposed on a customer paying by another method — in other words, a fee tied directly to the choice of credit card.
This rule applies nationwide and is enforced by the Federal Trade Commission (FTC). However, the CARD Act does permit discounts. A business can legally offer a lower price if you pay with cash, debit, or check. The difference is direction: a surcharge adds cost to the credit card price; a discount subtracts cost from the cash price. Both change the final amount you pay, but only the surcharge is illegal under federal law.
The federal rule does not cover all fees. A merchant can charge a fee for a service that has nothing to do with payment method — for example, a convenience fee for paying a utility bill online, or a service charge at a restaurant. These fees apply the same way regardless of whether you use a credit card, debit card, or cash. That distinction is important because it means the fee is not a surcharge.
State laws that go further than federal rules
Ten states have laws stricter than the federal ban. These states prohibit surcharges on credit cards even when the federal rule might permit them, or they extend the ban to debit cards as well.
| State | What the law covers |
|---|---|
| California | Bans surcharges on credit cards; permits discounts for cash |
| Colorado | Bans surcharges on credit and debit cards |
| Connecticut | Bans surcharges on credit cards |
| Florida | Bans surcharges on credit cards |
| Kansas | Bans surcharges on credit cards |
| Maine | Bans surcharges on credit cards |
| Massachusetts | Bans surcharges on credit cards |
| New York | Bans surcharges on credit cards |
| Oklahoma | Bans surcharges on credit cards |
| Texas | Bans surcharges on credit cards |
If you live in one of these states, a merchant cannot charge you a surcharge for using a credit card, period. The ban applies even if the card network's rules might otherwise allow it. Some of these states also ban surcharges on debit cards, which the federal rule does not address.
Other states have no additional law beyond the federal rule. In those states, merchants can charge a surcharge on debit cards (since the federal ban covers credit cards only), and they can offer cash discounts. However, they still cannot charge a surcharge on credit cards.
What card networks prohibit in their merchant agreements
Visa, Mastercard, American Express, and Discover each have their own rules about surcharges, written into the contracts they sign with merchants. These rules often go further than federal law.
Visa and Mastercard prohibit surcharges on their cards in all 50 states, regardless of state law. American Express and Discover have similar policies. This means that even in a state where state law does not ban surcharges, the card network itself can penalize a merchant for charging one — by fining them, suspending their ability to accept that card, or terminating their merchant account.
In practice, this means most merchants will not charge a surcharge on any credit card, because doing so violates their merchant agreement with the card network. The card network's rule is often more restrictive than state law, so merchants follow the stricter standard.
Fees that are legal because they apply to all payment methods
A business can charge a fee if it is not tied to your choice of payment method. These fees apply the same way whether you pay with a credit card, debit card, or cash.
Convenience fees are common in industries where paying by card is optional or unusual. A utility company, government agency, or tax preparer might charge a convenience fee for accepting online credit card payments, because processing that payment costs them money and the customer chose to use that method instead of mailing a check or paying in person. The fee applies to anyone paying by card online, not just credit card users.
Service charges at restaurants, hotels, or event venues are another example. A restaurant might add an automatic gratuity for large parties, or a hotel might charge a resort fee. These fees are not tied to payment method — they apply whether you pay with a credit card, debit card, or cash. They are legal as long as they are disclosed before you complete the transaction.
Processing fees for certain transactions can also be legal. For example, a business might charge a fee to process a returned check, or a fee for paying an invoice by phone with a card. Again, the key is that the fee is tied to the service or transaction type, not to the payment method itself.
How to recognize an illegal surcharge and what to do about it
An illegal surcharge is a fee added to your bill specifically because you chose to pay with a credit card. It might be labeled as a "credit card fee," "card surcharge," or "credit card processing fee." The merchant might add it at the register, on the receipt, or in the online checkout. The defining feature is that the fee would not apply if you paid by cash or debit.
If you are charged an illegal surcharge, you have two options. First, you can dispute the charge with your credit card issuer. Contact the card company and explain that you were charged a surcharge, which is prohibited by federal law (or state law, if applicable). The issuer can reverse the charge and investigate the merchant. Second, you can report the merchant to your state's attorney general or to the Federal Trade Commission. The FTC accepts complaints at reportfraud.ftc.gov.
Keep documentation: the receipt, the merchant's name and location, the date of the transaction, and any written communication about the fee. This makes it easier for your card issuer or the FTC to investigate.
Frequently Asked Questions
Can a gas station charge me extra for paying with a credit card instead of cash?
No. Gas stations cannot charge a surcharge for credit card use under federal law. However, they can offer a discount for paying with cash or debit. If a gas station is charging you extra at the pump for using a credit card, that is an illegal surcharge and you can dispute it with your card issuer.
Is a convenience fee the same as a surcharge?
No. A convenience fee is legal if it applies to all payment methods equally — for example, a fee for paying a utility bill online by card, check, or bank transfer. A surcharge is illegal because it applies only to credit card payments. The difference is whether the fee is tied to the payment method or to the service itself.
What if a business says the fee is for "payment processing"?
If the fee applies only to credit card payments and not to cash or debit, it is an illegal surcharge regardless of what the business calls it. The label does not matter — what matters is whether the fee is tied to your choice of payment method. If it applies equally to all payment methods, it is legal.
Can a small business charge a credit card fee if they cannot afford the processing costs?
No. Federal law does not make an exception for small businesses or high processing costs. A merchant cannot charge a surcharge on credit cards. They can offer a cash discount, or they can choose not to accept credit cards at all, but they cannot charge customers extra for using one.
What should I do if I see a sign saying "credit card surcharge applies"?
Do not make the purchase if you can avoid it. If you do pay, document the transaction and dispute the charge with your card issuer afterward. You can also report the merchant to your state's attorney general or the FTC. Merchants who post surcharge signs are often unaware of the law, so reporting them can lead to compliance.