Surcharging Credit Cards – Q&A for WRA Members

Surcharging Credit Cards – Q&A for WRA Members

Q. What is a payment card surcharge?

A payment card surcharge, also known as a checkout fee, is an additional fee that a merchant adds to a consumer’s bill when he or she uses a card for payment.

Q. Can I add a surcharge to card transactions?

As a result of a legal settlement in 2012 to resolve claims brought by a group of U.S. merchants, merchants in the U.S. and U.S. territories may add a surcharge to certain credit card transactions. This settlement became effective on January 27, 2013. Merchants who choose to surcharge must follow consumer disclosure and other requirements agreed to as part of the settlement.

Q. When can I begin to surcharge?

U.S. merchants must first notify Visa, MasterCard, and other credit card companies that they utilize of their intent to surcharge at least 30 days prior to implementing surcharging procedures. Check with your specific credit card company representative to determine their company’s exact rules regarding the implementation of surcharges on their specific card.

Q. How much do restaurants typically levy as a surcharge?

This can vary greatly, depending on location and the type of restaurant. In San Francisco, for example, surcharges are typically 4 percent. In Seattle, surcharges tend to be anywhere from 3 to 3.5 percent on bills of less than $10 (1).

Q. What should I consider when determining whether or not to assess a surcharge on card transactions?

Before choosing to surcharge, merchants may want to consider a number of factors, including:

• The potential impact on your customers’ experience?

• What your competitors might be doing?

• What information must be disclosed to your customers, and how cost of credit cards and other forms of payment?

Q. I am a merchant who intends to surcharge. What is the process I need to follow?

Merchants that intend to surcharge are required to notify your credit card company at least 30 days in advance of beginning to surcharge; a notification form can be found at:



• Limit surcharging to credit cards only (no surcharging debit and prepaid cards) and limit the amount to your merchant discount rate for the applicable credit card surcharged (2).

• Disclose the surcharge as a merchant fee and clearly alert consumers to the practice at the point of sale – both in store and online – and on every receipt.

• Merchants should also consider whether they comply with all applicable state or federal laws.

• Currently, 10 U.S. states have surcharging restrictions including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

Q. Can I assess a surcharge on both credit and debit card purchases?

No. The ability to surcharge only applies to credit card purchases, and only under certain conditions. Merchants cannot surcharge debit card or prepaid card purchases.

Q. Can I assess a surcharge on debit card transactions for which the cardholder using a debit card chooses “credit” on the point of sale terminal?

No. The ability to surcharge only applies to purchases made with a credit card, and only under certain conditions.

Q. Are there limits to the amount I can surcharge?

Yes. U.S. merchants may assess a surcharge on credit card purchases that does not exceed the merchant discount rate for the applicable credit card surcharged (2).

Q. Can I choose to surcharge Visa credit cards and not surcharge other card brands?

Yes, however, merchants must surcharge Visa on the same terms and conditions as any equal or higher cost competitor that imposes limits on surcharging.

Q. Am I required to disclose the surcharge to my customers?

Yes. Merchants that surcharge must disclose the surcharge dollar amount on every receipt. In addition, disclosures that a merchant outlet assesses a surcharge on credit card purchases must be posted at the point-of-entry and point-of-sale.

Q. What laws exist that may relate to surcharging?

Currently, 10 U.S. states have surcharging restrictions including California, Colorado, Connecticut,

Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Please consult with legal counsel to determine whether your practices comply with relevant state law.

Q. I operate stores in multiple states. I understand that state laws prohibit me from surcharging in some states where I operate, but not others – does that mean I can’t surcharge in any of the states where I operate?

No. If a merchant is prohibited from surcharging in one state, Visa’s rules do not prevent the merchant from surcharging in other states that allow the practice.

Q. Are surcharges subject to Washington’s B&O and retail sales taxes?

Yes. Washington’s business and occupation (B&O) and retail sales taxes apply to “gross proceeds of sales” without any deductions for costs of property sold, costs of materials used, labor costs, delivery costs, any expenses paid, etc. (RCW 82.04.070). In cases where an additional amount or surcharge is added to an invoice as a means to recover increased fuel, energy or other costs incurred by the seller, the surcharge is subject to tax in the same manner as the billing it is related to. Thus if a surcharge is placed on a restaurant bill, it is subject to retail sales tax and retailing B&O tax.

Q. Can I pick and choose what types of credit cards I add a surcharge to?

It depends on the specific credit card company’s rules. Check with your service provider to get exact instructions. An example from Visa is provided below.

“Merchants have the option to add a surcharge at the “brand level” to all Visa credit card transactions, or to particular types of Visa credit card transactions at the “product level” (e.g., Visa Traditional, Visa Traditional Rewards, Visa Signature), but not both.”

Q. Where can I get more information about Visa’s/MasterCard’s rules related to surcharging, requirements for surcharging and other related information?

Merchants can access this and other information by visiting .


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