Opinion, not legal advice
This is Jeremy Lessaris’s argument against passing card costs to customers. Surcharges, convenience fees and cash discounts are not interchangeable legal categories. A properly disclosed, compliant credit surcharge can be a lawful cost-recovery method. The original state table contains outdated descriptions and is marked historical below. Numerical extrapolations are scenarios, not measured losses. Check current state law, card-network rules and your agreement before changing pricing.
You’ve probably seen it, that little line item tacked onto a bill labeled “credit card surcharge” or “processing fee.” A surcharge and a convenience fee are distinct categories under network rules. The label alone does not establish which rules apply. Either can be an added cost to the customer. These fees are becoming so common they’re like a stealthy new tax. But unlike taxes, which support public services, surcharges pad the profits of banks and processors.
In my view, surcharging can shift the focus from reducing processing costs to passing them along. I worry that widespread adoption can increase customer prices and erode trust in small businesses. These are concerns and opinions, not evidence that every surcharge program is predatory or causes hyperinflation. The worst part? Business owners, who are also consumers, will feel the sting twice, once at the register and again in their bottom line. All the while, credit card processors will be laughing all the way to the bank.
J.D. Power’s 2025 U.S. Merchant Services Satisfaction Study reported that 34% of surveyed merchants added a surcharge to credit-card purchases.
What Exactly Is Surcharging?
Surcharging means passing credit card processing fees onto your customers. It may seem like a way to recover transaction costs, but here’s the catch: a percentage-based processing fee may apply to the total charged, including the surcharge. This is a fee-on-total effect, not by itself proof of improper double billing.
Example:
- In a hypothetical example, you sell a product for $100 and add a 3% surcharge. This rate is not permission to charge it: applicable cost caps and rules still control.
- The total is now $103.
- Your processor charges their fee (let’s say 2.24%) on $103, not $100.
In this hypothetical transaction, the percentage processing charge is $2.3072 on $103 versus $2.24 on $100, an increase of $0.0672.
At the end of the day, it’s the American consumer who pays.
Why Surcharging Can Backfire for Your Business
Some businesses understandably see surcharging as a straightforward solution to credit card fees. Like an import tariff, why not shift that burden to the customer if your business pays a processing fee?
Well, you have some pitfalls to consider when shifting that burden:
- Customer Backlash: No one likes surprise fees. They can lead to negative reviews, social media complaints and lost customers.
- Hidden Inflation: Surcharges contribute to rising costs, eroding consumer confidence and dampening spending habits.
- Reputational Damage: Nickel-and-diming your customers can tarnish your brand, especially when competitors offer transparent pricing.
- Legal Risks: Some states ban or restrict surcharging. Missteps can lead to hefty fines.
The Negative Impact of Surcharging on Consumers
Surcharging doesn’t just hurt businesses, it directly affects consumer behavior and satisfaction:
- Legal Disapproval: LendingTree’s September 2023 report found that 57% of surveyed cardholders thought charging extra for credit-card payment should be illegal. That is the respondents’ view, not a statement of the law.
- Customer Satisfaction: J.D. Power’s 2025 study reported processing-cost satisfaction 24 points lower among merchants who surcharge. This measures merchant satisfaction with processing costs, not consumer satisfaction with businesses.
Customer reactions are worth considering, but these historical survey references do not establish a causal effect on your transaction volume or profitability.
However, encouraging customers to switch to cash isn’t necessarily the solution. Cash handling has its own costs. This hidden cost is often overlooked but can significantly impact a business’s profitability. For more details on the hidden costs and benefits of cash vs. credit, check out this VeriFee article. https://www.verifee.com/resources/cash-vs-credit-hidden-costs-benefits/
Where Is Surcharging Banned or Restricted?
Surcharges are so polarizing that some states have laws regulating or banning this practice. Here’s a quick look at these states:
Historical source table, not a current compliance checklist. The original state labels below are preserved for context. Several are outdated or oversimplified. Do not implement a program from this table. Use the updated state guide and legal advice.
| State | Original label (historical) | Context / source |
|---|---|---|
| Connecticut | Banned | Merchants can’t charge extra for card use. ( CT Gen. Stat. §42-133ff) |
| Maine | Banned | Merchants must adhere to certain disclosure requirements. ( Me. Rev. Stat. Tit. 9-A, §8-509) |
| Massachusetts | Banned | Prohibits surcharges, but allows discounts for cash. ( MA Gen. Laws Ch. 140D §28A) |
| Oklahoma | Banned | Outdated ban label. SB 677 permits qualifying credit-card surcharges under a 2% cap from November 1, 2025. See the updated Oklahoma guide. |
| California | Banned but Challenged | Do not use the original ban label as current advice. Review the Attorney General’s guidance, litigation history and current price-display rules. |
| Colorado | Restricted | Companies may charge up to a 2% surcharge or an amount equal to the company’s actual costs paid to a processor. |
| Georgia | Restricted | Convenience fees and surcharges are distinct. The original summary does not establish a general state surcharge rule. |
| Kansas | Restricted | An apparent state allowance does not override lower network cost caps. |
| Minnesota | Restricted | Check current total-price disclosure requirements and applicable exceptions. |
| New Jersey | Restricted | Surcharges are permitted, but they may not exceed the cost the merchant pays to accept the card. |
| New York | Restricted | Check current displayed-total-price and cost-limit requirements. |
| Nevada | Restricted | Check current state law and card-network requirements. |
| South Dakota | Restricted | Check current state law and card-network requirements. |
| Texas | Restricted | The original restricted/prohibited description is not a reliable statement of current enforceability. Obtain current legal guidance. |
Read the updated state surcharge guide and Oklahoma’s updated surcharge rules.
Cash Discounting: The Sneaky Cousin of Surcharging
Companies have found sneaky ways to impose surcharges without being so candid about it. Instead of charging a fee for using a card, the company increases all prices by the fee they would typically charge, let’s call it a 3% increase, and offers a discount to cash or check customers.
With this practice, that $100 cash-price product carries a $103 card-price tag for credit card users and the consumer is none the wiser. A properly disclosed cash discount differs from a surcharge. For a $103 displayed price to become $100, the cash discount is $3, or about 2.91%, not 3%. Presentation and compliance matter, not just the program name.
Credit card processors may tell companies that cash discounting programs are perfectly legal in all states, as they skirt the surcharge laws by rolling the surcharge into the price and offering a cash discount. To a savvy consumer, though, a fee is a fee, regardless of how you paint it.
The Slippery Slope of Normalizing “Junk Fees”
Surcharging falls under the broader umbrella of “junk fees,” a term referring to hidden or inflated fees that don’t correspond to actual costs. Some examples of these fees in the real world are the random “resort fee” on your hotel bill or the “service charge” on your concert ticket. Once industries normalize these fees, it’s tough to go back.
Credit card processors are pushing hard to normalize them. They’ve even hired political lobbyists to protect surcharging and reframe it as “freedom for businesses.”
As more businesses embrace surcharging, consumer groups fear it will become the norm and increase prices.
The Processors’ Hidden Agenda
Credit card processors aren’t just passively benefiting from surcharges, they’re actively working to normalize them. Behind the scenes, they’re lobbying to shift the surcharge burden directly onto consumers, eliminating even the pretense of merchant control. Some processors are already floating surcharge rates as high as 4%, a dramatic increase when compared to the average interchange fee for a Visa debit card, which the original incorrectly reduced to 0.05% alone. The covered-debit interchange cap includes a 21-cent component and an eligible 1-cent fraud adjustment. It is not an all-in merchant fee or a credit-surcharge benchmark. Visa and Mastercard prohibit surcharging their debit and prepaid cards, including debit transactions run without a PIN.
By grouping pricing together and inflating fees under the guise of “standardization,” processors aim to blur the lines between legitimate costs and profit-padding junk fees. This normalization isn’t just bad for businesses, it’s a slippery slope toward unchecked corporate greed, where consumers bear the brunt without even realizing it.
Two common surcharge programs you should know
You’ll generally see two types of surcharge programs:
- Standard surcharge model: In this illustrative model, you add a permitted surcharge to eligible credit-card transactions, subject to applicable law, network cost caps, notice and disclosure rules The percentage processing fee may apply to the charged total. The amount recovered depends on your agreement and actual costs.
- “Zero-Fee” Processing: A provider markets a program as “no fees for the merchant” by shifting eligible costs to customers. Inspect the actual agreement, network assessments, markup, fixed charges and exceptions. Not every difference between interchange and a surcharge is processor profit. You may save money initially, but your customers end up footing the bill, potentially damaging your future business chances.
Regardless of the scenario, the true beneficiaries of these surcharges are the processors. This passing of the buck has led many consumers to vote with their wallets and boycott businesses that pass these fees onto customers.
The Economic Impact: Surcharges vs. Inflation
While inflation is a natural economic phenomenon, surcharges represent an artificial, avoidable cost layered on top. Imagine adding an extra charge to eligible credit-card transactions, from your morning coffee to your grocery bill to your gas tank. This is a concern about higher customer prices, not a demonstration of hyperinflation. A one-time price increase is not the same as an ongoing economy-wide inflation rate.
If surcharges become normalized, they could outpace traditional inflation, creating a compounding effect. For example, consider groceries: with suppliers, distributors and retailers all passing on credit card surcharges, the cumulative effect could inflate prices significantly beyond the typical rate of inflation. The same goes for gasoline, utilities and everyday essentials. It’s an economic ripple effect that touches every corner of the marketplace.
The Path Forward: Stop Passing the Buck
Credit card processors have convinced many businesses that passing on surcharges to customers or offering cash discounts are cost-cutting measures that benefit the business. They convince you of this all while scraping from the top of the surcharges you’re charging.
Now’s the time to stop passing the buck and demand a few key things from credit card processors.
Steps You Can Take
- Review more transparent pricing structures: Consider processors with an interchange-plus pricing model. In this model, the interchange fee and the processor’s markup are separate, offering more transparency in the pricing so you can more easily negotiate your fees.
- Compare processors: It’s easy to assume all processors are equal, so you sign up with the first one who walks through your door with a flashy new way to pass on fees. Instead, compare multiple processors and scrutinize their fees before choosing the best one for you.
- Focus on your customers: Your customers are the ones who keep the lights on, so focus on reducing all costs to help offset processing fees and keep your prices low.
At VeriFee, we pride ourselves on exposing these predatory processor practices and pushing businesses to fight against them. This will put businesses back in control and keep credit card processors from using junk fees to collect even more revenue.
Stop the surcharge. End the cash discount gimmick. Fight back.
Business owners like you must oppose another junk fee disguised as a convenience or cost-recovery measure. Focus on transparency, fair fees and customer loyalty and you can protect your brand and bottom line without penalizing the customers who keep your doors open.
