Payments Glossary · Law & Regulation
No-Surcharge Rules and Network Surcharge Caps
Also called surcharge rules, credit card surcharge, 3 percent cap
Surcharging is governed by three separate layers: network rules, state law, and disclosure law, and the strictest one always wins.
What it is
A surcharge is a fee added to a credit card transaction to offset acceptance cost. Whether and how you may impose one is decided by three independent layers, and you must satisfy all of them. Network rules come first because they carry the fines. Effective April 15, 2023, Visa reduced its U.S. merchant surcharge cap to the lesser of the merchant discount rate or 3 percent. Mastercard has remained at 4 percent. American Express and Discover must not be surcharged at a rate higher than what you charge on Visa and Mastercard. Surcharging requires written notice to your acquirer at least 30 days in advance, with Visa also requiring notice to Visa. Debit and prepaid cards may not be surcharged at all, regardless of how the terminal processed them. The surcharge must appear as a separate line item on the receipt, with disclosure at the point of entry and the point of transaction. State law comes second and can prohibit or restrict what the networks permit. Connecticut, Massachusetts, Maine and Puerto Rico prohibit surcharging. California's Honest Pricing law effectively bars a separate line-item surcharge by requiring mandatory fees to be in the advertised price. Colorado caps at 2 percent, New York requires the total price including surcharge to be posted before checkout, Minnesota caps at 5 percent with a required cash option, and other states impose their own notice requirements. Texas and Oklahoma are contested, with statutes on the books that courts have limited. Disclosure law comes third: state consumer protection statutes, and in Florida the Deceptive and Unfair Trade Practices Act, apply to how the fee is presented regardless of whether it is permitted. Visa's own public surcharging FAQ PDF is out of date, still describing a 4 percent cap and listing states as prohibiting surcharging where courts have held otherwise. Do not rely on it.
Why it matters to your business
If you are running a surcharge program, the questions that matter are whether your acquirer has your written 30-day notice on file, whether your system detects debit at the card level rather than by logo, whether your rate is the lesser of your actual cost and the cap, and whether your disclosure exists in every channel including phone and text-to-pay links. If you are being sold one, ask the salesperson to put in writing which model they are selling, surcharge, cash discount, dual pricing, or convenience fee, because those are legally different things with different requirements, and the word on the sign does not determine the legal character of the fee. This is education, not legal advice. Surcharging sits at the intersection of private network rules, state statutes and consumer protection law, and a Florida attorney should review any program before you launch it.
Where it gets contested
Enforcement pressure is real and increasing. Visa's published non-compliance schedule for surcharge violations is cumulative and escalating, reported at 1,000 dollars plus a remediation plan for an initial violation, 50,000 dollars at 30 days, 100,000 dollars at 90 days, 150,000 dollars at 150 days, and an additional 25,000 dollars per month beyond 180 days. In December 2023 an ISO memo circulated warning of increased Visa enforcement against non-compliant surcharge programs with exposure described as 50,000 to 1,000,000 dollars, and instructing ISOs to audit their surcharge merchants. Meanwhile the channel keeps selling programs that are not compliant. The recurring failures are a flat 3 or 4 percent applied to every credit card, which overcollects on card products where your actual cost is lower than the cap; surcharging debit because the terminal ran it as credit, which the card type and not the authorization method determines; cash discount programs that actually add a fee to a posted price, which makes them surcharges with every surcharge obligation attached; and zero-fee programs that claim to cover debit as well as credit, which only genuine dual pricing can do. The unresolved area is drift. A program set up correctly in 2023 can be non-compliant today because a rate changed, a state law changed, or a website redesign removed the signage.
How to check it yourself
Run a real debit card, not a credit card, through your own terminal and look at the receipt. If a surcharge was applied to it, stop the program today and call your processor, because surcharging debit is prohibited regardless of how the transaction was authorized.
Receipts
Claims above that are checkable, with where to check them. Published so you do not have to take anyone's word for it.
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Visa reduced its US merchant surcharge cap to the lesser of the merchant discount rate or 3 percent effective April 15, 2023, and publishes an escalating non-compliance assessment schedule
afslaw.com ↗ -
Reporting on increased Visa enforcement against non-compliant surcharge programs and penalty exposure communicated to ISOs
paymentsdive.com ↗ -
Surcharge, cash discount, dual pricing, convenience fee and service fee are distinct models with different rules
intellipay.com ↗ -
State by state surcharge law status and caps
merchantcostconsulting.com ↗ -
Visa small business regulations and fees guidance
usa.visa.com ↗