A 3% credit card surcharge is almost always a fee the merchant tacked on to cover what their bank charges them for processing your card. Businesses pay the card networks and their acquiring bank somewhere between 1.5% and 3.5% per transaction, and a growing share of them now pass that cost to the customer instead of building it into their prices.1NerdWallet. Credit Card Processing Fees Whether you actually have to pay the 3% depends on how you pay, what state you’re in, and whether the merchant followed the disclosure rules.
Where the 3% Comes From
When you hand over a credit card, the merchant pays an interchange fee to the card-issuing bank, an assessment to the network, and a markup to their processor. Average in-person interchange rates run from about 1.79% for Visa to 2.61% for American Express before those add-ons. Premium rewards cards cost the merchant more than plain cards, which is why the total often lands near 3%. In 2024, U.S. credit card companies collected a record $148.5 billion in swipe fees from merchants.2The Motley Fool. Average Credit Card Processing Fees and Costs
Surcharging is spreading. In the J.D. Power 2025 U.S. Merchant Services Satisfaction Study, 34% of merchants said they add a surcharge on credit purchases, up from roughly 20% the year before.3Fox 56 News. Restaurant Surcharges Are Hitting Credit Card Rewards Restaurants, salons, liquor stores, convenience stores, and gas stations are among the most common.4The Financial Brand. Credit Card Surcharges Cut Volume but Love for Rewards Is Strong
How to Avoid Paying It
Under card network rules, merchants cannot surcharge debit cards, prepaid cards, or EBT cards, even if you select “credit” at the terminal.5Visa. Merchant Surcharging Q&A Cash and checks are also outside the rule. Running your debit card as debit, or paying cash, gets you the base price. Many businesses that surcharge also advertise a cash discount that amounts to the same thing.
If you still want to use a credit card, do the quick math. A 3% surcharge wipes out the value of a standard 2% cash-back card. Even a category card paying 3% or more back barely breaks even after you factor in that sales tax often applies to the surcharge too.3Fox 56 News. Restaurant Surcharges Are Hitting Credit Card Rewards
The Rules a Legal Surcharge Has to Follow
Visa caps the surcharge at the merchant’s actual processing cost or 3%, whichever is lower. That ceiling has been 3% since April 15, 2023, down from the previous 4%.6CRF Online. Visa Reduces Its Merchant Surcharge Cap to 37Mastercard. Merchant Surcharge Rules5Visa. Merchant Surcharging Q&A Visa uses annual mystery shopping and consumer complaints to enforce its rules, with a $1,000 fine assessed against the acquirer for a violating merchant.
A surcharge sprung on you at the register, without a sign at the door and without a line on the receipt, is not compliant with the network rules regardless of state law.
Where State Law Bans or Limits Surcharges
State treatment varies. A handful of states have prohibited credit card surcharges by statute, historically Connecticut, Kansas, Maine, Massachusetts, and Puerto Rico. Penalties in various states range from civil fines up to $500 in Minnesota and New York to criminal misdemeanor exposure in Florida (second-degree misdemeanor) and New York (up to a year in jail).8National Conference of State Legislatures. Credit or Debit Card Surcharges Statutes
Several of those bans have been weakened by litigation. California’s ban in Civil Code §1748.1 was held unenforceable against the plaintiffs in Italian Colors v. Becerra (9th Cir. 2018), and the state Attorney General generally extends that ruling to similarly situated merchants.9California Office of the Attorney General. Credit Card Surcharges Florida’s ban is on the books but unenforceable due to a separate federal court ruling.4The Financial Brand. Credit Card Surcharges Cut Volume but Love for Rewards Is Strong Texas’s ban under Business and Commerce Code §604A.0021 was held unconstitutional as applied in at least one decision, though the Texas Attorney General’s office maintains it remains enforceable in some contexts.10Texas Attorney General. Opinion KP-0257 The U.S. Supreme Court set the underlying framework in Expressions Hair Design v. Schneiderman (2017), holding 8–0 that New York’s surcharge ban regulated speech and had to satisfy First Amendment scrutiny.11Supreme Court of the United States. Expressions Hair Design v. Schneiderman, No. 15-1391
Other states let merchants surcharge but impose their own ceiling:
- Colorado caps surcharges at 2% of the transaction or the merchant’s actual processing cost, whichever is lower. The rule (C.R.S. § 5-2-212) took effect July 1, 2022 and requires specific posted disclosure language and a separate line on the receipt.12Justia. Colorado Revised Statutes Section 5-2-212
- New Jersey limits surcharges to the merchant’s actual processing cost under a 2023 law (N.J.S.A. 56:8-156.1 and -156.2). Violations are treated as consumer fraud, and the state Attorney General penalized 30 businesses in a December 2023 sweep.13New Jersey Division of Consumer Affairs. Credit Card Surcharges FAQ
- Minnesota allows surcharges up to 5%, but only if the merchant informs the customer both orally and with a posted sign.8National Conference of State Legislatures. Credit or Debit Card Surcharges Statutes
Some states are also cracking down on how the fee is displayed. New York’s disclosure law, effective February 11, 2024, requires merchants to show the total credit card price before checkout, or dual pricing (a credit price and a cash price). A “3% surcharge on credit cards” sign at the register is not enough, and quietly adding a “convenience fee” or “processing fee” as a surprise line on the receipt is prohibited.14Governor of New York. Governor Hochul Announces New Law to Clarify Disclosure of Credit Card Surcharges15New York Department of State. Credit Card Surcharge One-Page Reference Guide California’s SB 478 (“Honest Pricing Law”), effective July 1, 2024, requires businesses to include all mandatory fees in the advertised price; a surcharge is generally excluded if the customer can pay another way, but if the business only accepts credit cards the surcharge is mandatory and has to be baked into the price.16USA Today. Credit Card Surcharges Business Fees
Surcharge, Convenience Fee, or Cash Discount
Not every extra line is a surcharge. A surcharge is a percentage added to a credit card transaction to offset processing cost. A convenience fee is a flat charge for paying through a non-standard channel, such as phone or web, and under network rules cannot be applied in a standard face-to-face sale.17Fiserv. Understanding Surcharging, Convenience, and Service Fees A cash discount runs the other way: the shelf price is the credit price, and the merchant knocks something off for paying cash. Federal law (15 U.S.C. § 1666f) prohibits card issuers from stopping merchants from offering cash discounts, so that structure is legal everywhere.18NFIB. Credit Card Surcharging Guide
Sales Tax Usually Rides on Top
In many states, the surcharge is treated as part of the sale price and is taxed. Florida’s Department of Revenue has ruled a processing fee passed to the customer is part of the taxable “sales price.”19Florida Department of Revenue. Technical Assistance Advisement No. 22A-006 California treats the surcharge as part of the consideration for the sale and taxes it.20California Department of Tax and Fee Administration. Annotation 295.2000 Washington takes the same approach, applying retail sales tax to the full amount including the surcharge.21Washington Department of Revenue. Surcharges Including Tariffs So on a $100 purchase in those states, you’re paying sales tax on $103, not $100.
What to Do if a Surcharge Looks Wrong
If a merchant surcharged you without disclosing it, tacked on more than the card network cap, or ignored your state’s rules, start with the merchant and ask for a refund or an explanation. If that goes nowhere, dispute the charge with your card issuer. The Fair Credit Billing Act gives you 60 days from the date the charge first appears on your statement to send a written dispute; the issuer has to acknowledge it within 30 days and resolve it within 90.22Federal Trade Commission. Using Credit Cards and Disputing Charges
You can also file a complaint. The Consumer Financial Protection Bureau accepts credit card complaints at consumerfinance.gov/complaint.23Consumer Financial Protection Bureau. How Can I Get a Refund on a Product or Service I Purchased With My Credit Card The FTC takes reports at ReportFraud.ftc.gov.22Federal Trade Commission. Using Credit Cards and Disputing Charges In a state with an active surcharge statute, the state consumer protection office or attorney general is often the most effective route. New Jersey consumers, for example, can contact the Division of Consumer Affairs, which has investigated and penalized merchants for surcharge violations.13New Jersey Division of Consumer Affairs. Credit Card Surcharges FAQ