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States That Don’t Allow Credit Card Surcharges

Written by Nickel - 19 Comments

States That Don't Allow Credit Card Surcharges

When I wrote last week about credit card surcharges, I noted that ten states have actually passed laws against such fees. This is in addition to the major card networks having banned them as part of their merchant agreement.

The ten states with laws against credit card surcharges include:

  • California
  • Colorado
  • Connecticut
  • Florida
  • Kansas
  • Maine
  • Massachusetts
  • New York
  • Oklahoma
  • Texas

If you are hit with a credit card surcharge or other checkout fee in one of these states, you can contact the state’s Attorney General. Contact information can be found on the National Association of Attorneys General website (link).

As I noted in that original post, merchants can offer discounts for cash payments without getting in trouble with the credit card networks, and such discounts are also legal in most (if not all) of the states with a surcharge ban.

Published on October 27th, 2011
Modified on November 7th, 2011 - 19 Comments
Filed under: Credit Cards

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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19 Responses to “States That Don’t Allow Credit Card Surcharges”

  1. 1
    Kelsey @ Zero to One Million Challenge Says:

    Oof, of course it’s legal in my state (NJ). You were saying in your other post though that Visa does not allow this, correct?

  2. 2
    Fat Bob Says:

    Allowing credit card surcharges is actually the consumer-friendly option. It’s passing on actual costs to the consumers who want the service while leaving others alone.
    If there were to be a law, I’d prefer it state that the main advertised price should note that it’s a cash-only price.
    These laws don’t allow a proper market to operate with respect to payment methods.

  3. 3
    Evan Says:

    In New York where it is illegal yet it happens ALL the time and no one seems to care. Huge at gas stations.

  4. 4
    Vince Thorne Says:

    They should atleast make it a law to reveal the surcharge whenever it is charged.

  5. 5
    John Says:

    It would be interesting to compare the difference between a typical surcharge for a transaction versus the actual costs that credit card companies actually incur for processing that transaction. When you consider that these companies make huge profits from interest charges for people who carry balances at up to 30%, annual fees for just having the card, and late payment fees, and then charging merchants for letting them into their stores to — in effect — lend money to purchasers, I can’t say I weep many tears for these folks.

  6. 6
    Fred Says:

    We are a manufacturer. Our customer, in Colorado, insists on paying by credit card which is not our preference so we have to eat the 2.5% processing fee because of this state law. Not right.

  7. 7
    Askmrlee Says:

    Gas stations and any other merchant can give a cash discount price and a credit card price which masks the effective surcharge. Fred: Are you being forced to take cards? I don’t know what you manufacture but is the cost of bad checks and slower processing higher than the 2.5% interchange? Have you tried Costco for merchant card services for a better rate? Can you insist on in person payment instead of phone/Internet to take advantage of the lower rate?

  8. 8
    Askmrlee Says:

    Gas stations and any other merchant can give a cash discount price and a credit card price which masks the effective surcharge. Fred: Are you being forced to take cards? I don\\\’t know what you manufacture but is the cost of bad checks and slower processing higher than the 2.5% interchange? Have you tried Costco for merchant card services for a better rate? Can you insist on in person payment instead of phone/Internet to take advantage of the lower rate?

  9. 9
    Andy P. Says:

    Fred.. Chiming in with Askmrlee… If your company is already in the habit of giving credit terms, even as short as 15 days, I would say you are at least as well off taking a credit card, assuming that it is NOT combined with additional terms… In other words, get the credit card payment upon delivery, not as a means to pay an aging invoice. Also, and ironically, if you encourage more credit card transactions, your fees will usually go down as your sales volume increases..

  10. 10
    Askmrlee Says:

    Last word on Fred’s situation. I bet this customer insists on card payment perhaps to earn a reward like cashback or points. I don’t want to get into too many details but reward cards usually have higher interchange rates than non reward cards and non in person transactions are higher than phone. Check with your processor and see if you can enforce an in person payment policy. You can offer cash discounts legally or “stick it to them” with a non-discounted invoice price.

  11. 11
    Matt Says:

    First – Askmrlee is right – Cash Discounts are (and always have been) allowed. This is what Gas Stations use to get around the “Surcharge” rules. Originally this “loop hole” was slated to end at the end of this year (2012) but that may change.

    Second – Fred, if you are accepting credit cards and you wish to retain the same margins you have on cash customers – build the fee into the quote. You can always give a cash discount (regardless of state) and if you decide not to give a cash discount – you can actually increase your profits by 2.5% (or whatever % you roll into your costs).

    Third – I work in this industry (I’m the Director of Sales for Payment Logistics) and have been here for years. I’ve seen thousands of merchants charge surcharges and get away with it – but many also get caught by Visa / MC and if they don’t listen when they are told to stop are risking losing their ability to process cards all together. If you really get annoyed at someone surcharging – call your issuing bank (look on the back of your CC and call that number). They’ll contact the merchant services company, who in turn will tell the merchant. At that point, the merchant listens or doesn’t and takes the risk.

    I strongly advise my clients to look at what successful companies do when dealing with CC expense. First, make sure it’s in check – depending on industry and average transaction size a good rate could be as low as 1% and up to 5%. It all depends on the interchange categories you can qualify for. Second, roll all of your expenses (rent, salaries, taxes, cc processing etc) into your costs. Doing this for CC fees can actually INCREASE your margin for cash sales.

    For example, you have an item which you normally sell for $9.50 but you at $0.25 (~2.5%) to cover CC processing – bringing the cost to $9.75. If someone pays with CC – you breakeven and make your normal margin. If someone pays with cash – you’ve increased your margin by 2.5%.

  12. 12
    michael Says:

    To all of those complaining about how it’s not right that the business has to “eat it” you must have never heard of the saying (or like a lot of americans now days, you have a short term memory) “The cost of doing business”.

    What’s not right is that I pay thousands for a product that you sell and if it fails (through no fault of my own) one day after the warranty expires you don’t take any responsibility for it at all. I have to not only eat the fee now but also either the cost of the repair guy or a whole new item.

    That’s what’s not fair.

  13. 13
    Jimmy Says:

    When is the consumer ever going to get a break? Why are we always getting screwed?

  14. 14
    Diamond Says:

    It is going to be something to see how many people will stop using their credit cards and then the credit card people will lose money. We must stand up and stop using them. It is something now you will be charge to shop come on now. This is crazy.

  15. 15
    ROSALIE DOUGHTY Says:

    SORRY, DIAMOND, BUT YOU ARE CHARGED NOW TO SHOP AT YOUR LARGE BOX STORES SUCH AS “SAMS”. YOU PAY AT LEAST $35.00 TO GO INSIDE THEIR BUILDINGS THEN YOU CAN SHOP. THIS HAS ALWAYS BOTHERED ME.
    I THINK THIS SURCHARGE IS RIDICULOUS BUT I AM SURE PEOPLE WILL ALWAYS USE CREDIT CARDS FOR CONVENIENCE AND SAFETY WHEN TRAVELING BECAUSE SO MANY PLACES DO NOT WANT PERSONAL CHECKS. REMEMBER THAT YOU ALSO HAVE TO BUY TRAVELERS’ CHECKS.
    YOU CAN’T WIN FOR LOSING IN THIS LIFE AND I’M NOT SMART ENOUGH TO FIGURE OUT AN ANSWER.

  16. 16
    Chester Pelt Says:

    Florida is serious about their law; I had a RV company recently add $300 to my trailer purchase to pay for half their credit card fee; I stumbled onto the fact that FL law 501.0117 prohibits such activity; I talked to one of the lawyers in the states attorneys office and was assured that it was illegal plus they wanted me to call them back if the company refused to refund the surcharge. Upon me telling the finance offical in the company that I was going to turn the case over to the states attorney, they refunded all the surcharge right away. They claimed not to know about the law!

  17. 17
    Sevivil Says:

    Instead of calling it a surcharge, call it a convenience fee. The state of Texas does this if you renew your drivers license they call it a convenience fee. Had to pay it to renew my license and the state of Texas is in the list of states. Always a loophole

  18. 18
    Kim Says:

    Michael, that’s why I almost always pay by credit card. My cards come with added protection on purchases of goods and services. Sevivil, what a government entity and a private business can legally do are not always the same. In Colorado, it doesn’t matter what it’s called, a business that accepts credit card payments may not collect a surcharge on credit card payments. Whenever anyone attempts to do so to me, I simply tell them the state law and they backtrack and remove the charge. Otherwise, I leave and report them.

  19. 19
    Robert Says:

    Fred.. if your business isn’t in Colorado.. I don’t think their law affects you, but check that. Convenience fees and surcharges are the same.. except when governments are involved. If you check a different site its says governments are allowed to add convenience fees since they are “non-profit” entities. Lastly, a simple 4-5% increase in your fees, products, whatever and a 2-3% discount for cash is very legal and can also be profitable. however these rules only apply to credit cards not debit cards… it is illegal to impose any fees for a debit card at this time anywhere. All of this has been compiled from several websites… I am not a lawyer, accountant or government official.

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