As increasing credit card processing fees continue to erode thin retail margins, more merchants are reluctantly considering surcharging—adding a percentage fee when a consumer uses a credit card—to offset these massive and uncontrollable costs. While surcharging is most often associated with small businesses, some national merchants are exploring its viability as volume shifts to “premium” credit cards and “card not present” digital transactions continue to incur unjustifiably high fees. Developing a surcharge strategy at scale depends on navigating a shifting matrix of state laws and card network rules, putting aside daunting operational and customer-experience considerations.¹

Shifting Legal Landscape

To consider surcharging, national merchants must first confront a patchwork of state laws and card network rules. 

Surcharging credit cards is legal in most U.S. states, but exceptions remain. For example, Connecticut, Maine, Massachusetts, and California technically prohibit surcharging, but these laws are likely dead letters as they bear the same text as the New York law that the U.S. Supreme Court struck down in Expressions Hair Design.² Other states—Colorado, New York, New Jersey, and Nevada—have adopted more nuanced post-Expressions laws that cap surcharges at the cost of acceptance, regardless of how difficult determining that cost may be.³ New York’s law also requires merchants to post the total price, inclusive of any surcharge.⁴  A gas station with “dual pricing”—listing separate prices for credit and cash or debit—might comply at the pump, but the New York law makes the most common form of surcharging (adding a % fee at checkout) illegal, and the law does so with a clarity that would likely comply with Expressions.

Interlocking Network Rules

Card network rules add another layer: Visa caps surcharges at 3% and Mastercard at 4%, but only up to the actual cost of acceptance, whichever is lower. This is a serious problem because many merchants do not know their cost of acceptance with any precision at the time of purchase, and monthly reporting often combines credit with debit. 

Most critically, American Express prohibits “discrimination” against its cardholders. That means that any surcharge levied on Amex cards also must be levied on all other payment cards, including, according to Amex, debit cards—which, in turn, is prohibited by Visa and Mastercard rules. Merchants also are supposed to notify their payment processors before implementation—the better to alert Visa and Mastercard secret shoppers— and must provide clear disclosures at the point of sale to allow their customers to avoid the surcharge by using cash or debit cards, and to avoid running afoul of consumer protection laws and network rules.

What is a National Merchant to Do?

To be clear, virtually all surcharging in the market today is noncompliant—whether by surcharging debit cards in violation of network rules, surcharging Amex cards but not debit cards, or by simply ignoring state law. For national merchants with stores in multiple states, compliance means implementing state-specific surcharging policies, forgoing surcharges in states where prohibited, and instituting a monitoring program to keep abreast of shifting state laws and evolving network rules. And even if you are not a national merchant, to consider surcharging, you need to be aware of the specific (and ever-changing) network surcharging rules and state laws in your geographic footprint.

For now, national merchants evaluating surcharging should only expect to surcharge—credit cards only no more than 2%, to keep safely below the average cost of acceptance while avoiding charges of price-gouging. And for national merchants that accept Amex, surcharging credit cards but not debit cards runs the risk of noncompliance with Amex’s rules.⁶ A merchant considering surcharging in the current landscape should be prepared to resist pressure from Amex or even to drop acceptance if Amex were to enforce its rule with fines. Many in the industry presume this risk is low, as Amex may tolerate surcharging so long as its cards are treated the same as all other credit cards.⁷ But with most surcharging limited to local businesses, this presumption has largely been untested.

By Owen Glist

Owen Glist (oglist@constantinecannon.com) is a partner specializing in antitrust and payments law at Constantine Cannon LLP. He serves as outside counsel to the MAG and has represented dozens of merchants in the interchange litigation (MDL 1720).

Endnotes

1.  Ever since the first MDL 1720 settlement in 2012 that promised to liberalize Visa and Mastercard surcharging rules, legislation addressing surcharging has been regularly proposed in dozens of states throughout the country.

2.  See Expressions Hair Design v. Schneiderman, 581 U.S. 37, 137 S.Ct. 1144 (2017) (concluding that New York General Business Law § 518, which then mandated that “[n]o seller in any sales transaction may impose a surcharge on a holder who elects to use a credit card in lieu of payment by cash, check, or similar means,” regulates speech, and certifying the question to the Court of Appeals to determine the regulation’s constitutionality); Expressions Hair Design v. Schneiderman, 32 N.Y.3d 382, 393 (2018) (on remand, “conclud[ing] that a merchant complies with General Business Law § 518 if and only if the merchant posts the total dollars-and-cents price charged to credit card users”); Conn. Gen. Stat. §42-133ff(b) (“No person may impose a surcharge on any transaction.”); Title 9-A M.R.S. § 8-509(1) (“A seller in a sales transaction may not impose a surcharge on a cardholder who elects to use a credit card or debit card in lieu of payment by cash, check or similar means.”); M. G. L. c. 140D, § 28A(a)(2) (“No seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.”); Cal. Civil Code §1748.1(a) (“No retailer in any sales, service, or lease transaction with a consumer may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check, or similar means.”).

3.  See, e.g., Colo. Rev. Stat. § 5-2-212(1)(c) (“A seller or lessor may impose a surcharge pursuant to either subsection (1)(c)(I) or (1)(c)(II) of this section as follows: (I) An amount not to exceed two percent of the total cost to the buyer or lessee for the sales or lease transaction. . . . (II)(A) An amount not to exceed the merchant discount fee that the seller or lessor incurs in processing the sales or lease transaction.”). On May 28, 2025, the Oklahoma legislature enacted similar legislation set to take effect on November 1, 2025, except that the Oklahoma legislation includes a ”whichever is less” requirement. See S.B. 677, 2025 Leg., Reg. Sess. (Ok. 2025) (“No surcharge shall exceed two percent (2%) of the total transaction or the actual amount to be charged to the person or retailer to process the credit card transaction, whichever is less.”); see, e.g., N.Y. Gen. Bus. Law § 518(1) (“any such surcharge may not exceed the amount of the surcharge charged to the business by the credit card company for such credit card use”); N.J.S. 56:8-156.2(2)(a) (“A seller shall not impose on a customer who uses a credit card for a transaction occurring in New Jersey a surcharge that is greater than the actual cost to the seller to process the credit card payment.”); Nevada Attorney General, Attorney General Ford Advises Nevadans to be on the Lookout For Deceptive Credit Card Surcharges (Nov. 16, 2020) (“The surcharge may not exceed how much the merchant pays to accept the card – typically 1 to 1.5%.”).

4.  See N.Y. Gen. Bus. Law § 518(1) (“Any seller in any sales transaction imposing a surcharge on a customer who elects to use a credit card in lieu of payment by cash, check, or similar means shall clearly and conspicuously post the total price for using a credit card in such transaction, inclusive of surcharge . . . .”); id. § 518(2) (“Any seller who violates the provisions of this section shall be liable for a civil penalty, recoverable in an action or proceeding brought in a court of competent jurisdiction not to exceed five hundred dollars for each such violation.”). See also FTC Rule on Unfair or Deceptive Fees, 16 C.F.R. § 464.2(a) (“It is an unfair and deceptive practice and a violation of this part for any business to offer, display, or advertise any price of a covered good or service without clearly and conspicuously disclosing the total price.”). The FTC Rule applies only to live-event tickets and short-term lodging. See id. § 464.1 (“Covered good or service means: (1) Live-event tickets; or (2) Short-term lodging, including temporary sleeping accommodations at a hotel, motel, inn, short-term rental, vacation rental, or other place of lodging.”).

5.  Lynne Marek, Visa Cracks Down on Surcharge Programs, Payments Dive (Jan. 8, 2024); Kevin Woodward, Acquirers Seek Answers from a Visa Surcharging Executive, Digital Transactions News (Nov. 3, 2023).

6.  Imposing a surcharge on debit cards has its own problems, including that: (1) Visa and Mastercard have actively enforced their ban, issuing hefty non-compliance fines; (2) customers may understand the economics of a credit card surcharge and pay with debit to avoid it; (3) debit is a lower-cost payment method, and (4) some customers may not have available credit and thus have no way to avoid the surcharge.

7.  A proposed 2024 settlement of the long-running case against Visa and Mastercard, MDL 1720, also liberalized surcharging rules, allowing merchants to impose a 1% surcharge even if the merchant did not also surcharge Amex. The court rejected that settlement as inadequate, setting up the possibility that further changes to Visa and Mastercard’s surcharge rules may be part of a future modified settlement.