Investopedia defines a surcharge as “an extra fee, charge, or tax that is added on to the cost of a good or service, beyond the initially quoted price.” Right off the bat, many business owners will balk at the idea of tacking on additional fees for their goods and services. Yet surcharges are growing in popularity due to their benefits for small businesses.
This begs the question, are surcharges/checkout fees a good idea for your business? We will explore this question today by examining the ins and outs of merchant surcharges, the related laws, regulations, and requirements, and by answering some common questions about surcharges and cash discounts.

What is a Merchant Surcharge?
Merchant surcharges involve a small fee being tacked onto credit card purchases. The intention of these surcharges is to recoup the fees incurred by merchants during credit card transactions. Surcharges are a way for merchants to essentially transfer the burden of transactional fees from themselves and onto the customer.
Obviously, this can lead to a number of questions and/or issues. Some savvy customers will be quick to ask what this surcharge is on their receipt and why they are being charged. Surcharge laws and regulations can also be quite complex to understand and implement.
Is it Legal to Charge Credit Card Surcharges?
In the United States, it is legal to use surcharges at a federal level. However, state laws supersede these federal rulings, and there are currently eleven (11) states which prohibit merchant surcharges. While these laws are subject to change at any time, here are the current list of states and territories which do not allow surcharges:
Oklahoma
Texas
New York
California
Kansas
Maine
Colorado
Florida
Connecticut
Massachusetts
Puerto Rico
Instead of taking on this burden alone, we recommend speaking to a qualified merchant services professional. They will be able to help you set up and maintain a legal and beneficial surcharge program for your small business. A merchant services professional also may be able to help you determine whether a surcharge program is right for your business at all.

Requirements for Implementing Card Surcharges
The requirements for implementing a credit card surcharge program can be daunting. For example, Visa requires its processors to notify them 30 days prior to initiating a surcharge program, keep a strict limit on credit card surcharge amounts, and follow strict surcharge disclosure procedures.
While requirements can be quite complex, there are two primary takeaways which all business owners should understand before considering surcharges:
Surcharges may never exceed your business’s transactional fees. In other words, you are never entitled to “make money” from surcharges. Surcharges may only serve to cover your credit card processing fees.
Disclosing surcharge information is required. Similar to cash discounts, any surcharge details must be clearly posted and explained to the customer before the transaction. Speak to a merchant services professional for more details about regulations in your state.
At the end of the day, surcharges are beneficial for businesses because they do effectively recoup credit card processing fees. The downside is that they can be difficult to implement, may confuse your customers, and expose your business to a certain degree of risk.

Checkout Fees for Small Businesses FAQs
When Should I Consider Adding Checkout Fees to Transactions?
There is no one answer to this question, but it basically boils down to the potential benefits of surcharges being worth your time, effort, and the associated risks. With all of the legal red tape and the hassle, many business owners opt to simply avoid checkout fees. Yet checkout fees/surcharges are often necessary to cover processing fees. Work with a qualified merchant services account rep to understand what fits your business’s needs.
Are Surcharges the Same as Offering a Cash Discount?
This question comes up when business owners are trying to determine the best route to save when customers pay with cash rather than credit cards. Cash discounts are savings that are passed on to cash-using customers whereas surcharges are additional fees for non-cash-using customers. While these two concepts are distinct, they are essentially two ways of reaching the same goal.
Can I Place Surcharges for all Electronic Payment Methods?
No, surcharges are only legal when they are placed on credit card payments. The Dodd-Frank Wall Street Reform and Consumer Protection Act protects consumers from surcharges for purchases made with debit cards, prepaid cards, or EBT cards.
True Merchant Helps Businesses with Surcharging and Cash Discount Programs
The merchant service professionals at True Merchant have extensive experience working with businesses of all sizes. We take pride in getting to know our clients so that we can fine-tune our services to meet their unique needs. Whether you are looking to secure credit card transactions, utilize enterprise resource planning, or need to implement a surcharge program, we are here to help.
To learn more about how we can help your business grow, please call or email a member of our qualified merchant services team today!