State-by-State Surcharge Laws

Let's Dig In: Surcharge Laws

Navigating the laws and compliance guidelines for surcharging can be challenging for businesses, especially when regulations vary from state to state. This article provides a comprehensive overview of surcharge compliance across the United States, helping you understand where and how surcharges can be applied.

Understanding Surcharges and Compliance

A surcharge is an additional fee added to a credit card transaction, which helps businesses offset the cost of credit card processing fees. However, it is essential to ensure that these fees are applied in compliance with state laws and card network rules. Learn more about surcharging here.

General Rules for Surcharges:

• Surcharges can only be applied to credit card transactions, not debit cards.

• Surcharge fees must be clearly disclosed to customers before they complete their purchase.

• The surcharge amount cannot exceed the cost of accepting credit cards, typically capped at 3%.

States with Surcharge Prohibitions

Certain states have explicit prohibitions against surcharging but allow for cash discount programs. Here are the states where surcharging is prohibited:

Connecticut, Massachusetts, and Puerto Rico:

• Surcharge fees are prohibited.

• Merchants can use a cash discount program, where they increase the price for card payments but offer a discount for cash payments.

States with Overturned Surcharge Laws

Some states had laws prohibiting surcharges that were overturned by courts on the grounds of commercial free speech. These states currently allow surcharges:

California, Florida, Kansas, and Texas:

• Merchants must prominently display the surcharge fee before the purchase is finalized.

• Surcharge fees cannot exceed the merchant's actual processing costs.

States with Regulated Surcharge Fees

Several states regulate the application of surcharge fees but do not prohibit them:

New Jersey, Colorado, and Minnesota:

• Surcharge fees must be prominently displayed before the purchase.

• The surcharge amount is capped at the actual cost of processing or a specified percentage (e.g., 2% OR the actual cost to the merchant to process the credit card payment in Colorado, and 5% in Minnesota).

States with No Surcharge Regulations

In states not specifically mentioned above, there are typically no state-level laws regulating surcharges. However, merchants must still comply with card network rules and federal laws, ensuring transparency and disclosure.

Compliance Tips for Multi-State Operations

If your business operates in multiple states, it's crucial to comply with the specific laws of each state. Here are some tips:

• Configure your point-of-sale system to apply surcharges only where permitted.

• Use signage to clearly communicate surcharge policies to customers.

• Regularly review state laws and card network rules to ensure ongoing compliance.