Credit Card Surcharges

Is This Even Legal? What About Minimum Purchase Amounts?

••• It costs money to accept credit cards. Betsie Van Der Meer/Taxi/Getty Images

You may have run into a merchant who adds a surcharge for using your credit card and wondered: is this even legal? Starting in 2013, it became legal to charge customers extra if they use a credit card, and retailers can even require a minimum purchase amount when you use a credit card. However, there are a few rules that merchants have to follow when adding credit card surcharges.

When did This Happen?

If it’s a surprise that retailers can do this, you’re not alone. The laws allowing credit card surcharges and minimum purchases are relatively new. As a result of a class action lawsuit against card issuers and banks, merchants won the right to add surcharges or “checkout” fees beginning in January of 2013. But most merchants were (and continue to be) slow to adopt credit card surcharges. Some, like many consumers, may not know about their ability to charge extra, and others don’t want to appear as if they’re dinging customers for a few extra bucks.

Retailers are also allowed to set minimum purchase requirements after 2013 as a result of the Durbin Amendment (part of the Dodd–Frank Wall Street Reform and Consumer Protection Act, which was passed as a result of the financial crisis). Initially the minimum is set at no more than $10, but that number may be adjusted in the future, presumably due to inflation.

In the past, retailers weren’t allowed to do either of these. However, it wasn’t unheard of for merchants to “unofficially” set a minimum purchase amount. These practices were not necessarily illegal at the time, but they were a violation of the merchant’s agreement with the credit card companies. Merchants are rarely punished for breaking the rules.

States Weigh in on Credit Card Surcharges

While it’s legal under federal law to add a surcharge to credit card transactions, some states prohibit the practice. Ten states already had laws on the books before 2013. Now that merchants can officially use surcharges, other states are considering outlawing the practice as well. The states that originally made credit card surcharges illegal are California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

Restrictions on Merchants

If merchants decide to use credit card surcharges, they have to follow a few rules:

  • The fact that there is a surcharge must be clearly disclosed to you before any transaction
  • The credit card surcharge must be shown on your receipt
  • The surcharge can’t exceed the amount the retailer pays or 4% (you pay the lesser of these two, typically 2-3%)

Note that surcharges and minimum purchase requirements are only allowed for credit card purchases – not debit card transactions (even if you sign for the transaction instead of using a PIN).

Breaking the Rules

Don’t be surprised to find merchants breaking these rules. They’re confusing for everybody, and some merchants just choose not to follow them. What can you do if somebody uses an illegal credit card surcharge?

First, keep in mind that the business owner might not be familiar with the rules and laws regarding credit card surcharges. They’ve got a lot to deal with, especially in a tough economy, and cutting their own revenue is not on the top of their list of priorities. If it’s a small business or mom-and-pop shop, just let them know that you think they may be breaking the rules – it’s in their best interest to know this and stay out of trouble with credit card companies and regulators (large companies should already be well aware of this).

Businesses with a loyal following can always let their customers know that they prefer not to be paid with credit cards, and they might even be able to offer discounts for cash purchases.

If a business is blatantly breaking the rules and you want to do something about it, you can report the business to credit card companies, who have signed agreements with these businesses that prohibit such activity. Report violations by calling your card issuer using the number on the back of your card, or submit a complaint online:

If businesses blatantly break the law (by adding surcharges in states that prohibit them, or surcharging more than is allowed under federal law), you can also report them to your state’s Attorney General.

If you’re curious about why businesses continue to risk breaking rules and laws, their argument is this: they have to pay fees to accept credit cards, generally ranging from 1-3% of every transaction (fees for debit cards are lower). In some industries, especially when small purchases are involved, it’s hard to make any money when customers pay with a credit card. If you want to support your local business, try to avoid paying with credit cards and tell your friends to do so – that way the business can keep more of what they charge, and they won’t be so tempted to bend the rules.