All business owners have had to deal with the perils of credit card processing and fees that come with it. If you haven’t read through it already, check out our guide to credit card processing for retailers. Another blog offered some tips on how to minimize processing your fees. But in recent years, more and more businesses have been fighting back with something new: credit card surcharges and convenience fees passed on to the customer.

For many retailers, credit card processing fees have simply forced them to raise their prices, so in that sense, this is nothing new. What is new, however, is the fact that these fees can now be assessed as surcharges, and in more limited cases, convenience fees.

Like credit card processing, this is a complicated and nebulous topic; it also may have strong legal implications for your business. Moreover, the laws vary widely between states. If you’re thinking about implementing surcharges or convenience fees at your store, be sure to contact your local and state government to make sure you are following all proper protocol. Below is our retailer’s guide to credit card surcharges and convenience fees.

What Are Convenience Fees?

Convenience fees are more straightforward and don’t typically affect retailers as much. But it’s important to understand how they differ from surcharges.

A convenience fee can only be assessed on occasions where the merchant is offering the customer an extraordinary way of payment. This is commonly found with payments made over the phone or online for merchants who normally only accept in-person payments.

eCommerce retailers and telephone ordering services CANNOT charge a convenience fee since these platforms are their normal forms of accepting payments.

Government and educational institutions are a common exception to these rules. Fees to offset their processing fees are almost always assessed on top of the payment. This is due to tax reasons. The government’s obligation is to collect all taxes owed to them. If they have to pay a processing fee, they will not receive the tax in full and thus make all of us pay for it. Have fun fighting it!

What Are Retail Surcharges?

Surcharging is a new tactic many businesses are using to offset some of their credit card processing fees. In most states, retailers are now able to add a surcharge to all debit transactions. Prior to this practice, you’d commonly see businesses offer discounts for cash transactions. In reality, the customer is was already paying this fee, but the technique for assessing it has changed.

When Were Surcharges First Implemented?

As mentioned in the introduction, these rules vary between states. In fact, these are still illegal in Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, and Oklahoma. Credit card companies don’t want businesses to deter consumers from using their cards, and have fought hard to prevent these surcharges from being implemented.

VISA and MasterCard have historically outright banned them at any place of business which accepts their form of payment. Discover and American Express have allowed surcharges, but only if the business assesses the exact same fee for all other card brands. In order for a retailer to take advantage of this, they would therefore only be able to accept Discover and American Express.

But merchants have been fighting back. Credit card processing rates have increased an average of 24% between 2004 and 2017. In 2013, a class action lawsuit from merchants against VISA and MasterCard prevented the card networks from banning merchants against surcharges. State laws (see the six mentioned above), though, can still inhibit this.

But in March of 2017, the Supreme Court ruled with merchants in a New York case, confirming the argument that preventing surcharges was in violation of free speech. While the Court will not force every state to oblige, it confirmed that New York must. Shortly thereafter California revoked their ban on surcharges. The remaining six states may soon follow.

What Are the Rules with Surcharges?

While surcharges are now legal in most states, they are heavily regulated and must be carefully assessed.

  1. The fee can only be assessed on credit transactions, not debit or ATM.
  2. Surcharges cannot exceed the credit card processing fees.
  3. Because very few credit card processing charges exceed 4%, surcharges can never exceed this percentage.
  4. Notice of the charge must be posted near the entrance of the store.
  5. Additional notice of the exact details of your particular surcharge must be visible around your retail POS system.
  6. You must apply a uniform surcharge to all cards by EITHER card brand or card product. Basically, you can’t pick and choose which specific cards you’ll assess the fee on.
  7. The surcharge must be its own line item on all receipts. Make sure your point of sale can do this.
  8. It must also be taxed.
  9. The fee can EITHER be assessed as a percentage of the total sale, or a flat, fixed rate. Most retailers charge a fixed rate for transactions under a certain amount.

How Can You Implement It?

First, speak with your lawyer or your local government. Once you’re perfectly clear on all rules that apply to your store, notify all card brands which your store accepts. They each have forms that must be filled out and returned within 30 days of beginning the surcharge rates.

You must also notify your acquiring bank within 30 days. Different banks have different rules and procedures so be sure to communicate with them quickly.

You’ll also need to decide from the beginning which card brands and card products this will apply to. Lastly, get your signs up and change your POS software so that the correct transactions are properly charged.

What Are the Pros and Cons of Applying a Surcharge?

It’s important to weigh the costs and benefits of adding a surcharge. Remember, too, that credit card processing fees can be written off on your taxes. A surcharge, on the other hand, will be included in your income. Despite that, a surcharge will typically exceed the amount of any tax write-offs.


  1. Simply put, a surcharge can increase your profits. You’ll never completely offset the credit card processing fees, but you can take a major chunk out of them. For small businesses whose bottom line suffers due to processing fees, this can make a huge difference.
  2. Higher surcharges may allow you the option of lowering your prices and becoming more competitive on that level.
  3. It’s somewhat malleable. As discussed above, you can decide how the fees will be assessed to a certain extent. Will it cover all credit transactions? Will it be a percentage or flat rate? How about a price ceiling on when the charge is applied?


  1. Encouraging more cash transactions might hurt your profits. People spend less when they’re shopping with cash instead of a card.
  2. Some consumers might just refuse to shop with you. Large retailers have been outspoken about the fact that they’ll never add these surcharges (they can much more easily afford to eat certain costs). Many consumers, in turn, will shop with them instead of smaller businesses.
  3. If you implement a percentage-based fee, you may discourage large purchases. Vice versa with a flat fee – a 35 cent fee on each transaction will make people think twice about that pack of gum.

How Do You Get Information from the Card Networks?

VISA, MasterCard, AmEx, and Discover all offer guides for retailers thinking about adding a surcharge to credit transactions.

Retail Surcharges with Your Point of Sale System

Your point of sale must be compatible with surcharges. The fee must be assessed as a line item on each receipt. You must be able to alter the rules for charging the fee. For instance, you should be able to set a ceiling on transactions in which the fee is charged or a maximum amount that can be charged for any transaction. With KORONA’s payment technology assessing a surcharge is safe and easy. If you’re thinking about a new POS system, click the button below to find out more and start your free trial.

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