Home » Is it Legal to Charge a Credit Card Fee?

Many businesses come to us asking whether it’s legal to pass on the processing costs to their customers. Is it legal to charge a credit card fee? The short answer is. Yes, but with some caveats. 

To give you a more nuanced answer, we have to delve into a web of regulations, types of fees, and best practices that merchants need to follow. 

So in this article, we will do exactly that. We’ll also provide practical steps on how to legally implement these fees and show how SecureGlobalPay can help eliminate processing costs entirely. 

Types of credit card processing fees

Credit card processing fees are charges that merchants incur when they accept payments via credit card. They are typically a percentage of the transaction amount plus a fixed per-transaction fee. 

These fees cover the cost of various services involved in processing credit card payments, including:

• Interchange fees: Paid to the card-issuing bank.
• Assessment fees: Paid to the card networks (Visa, MasterCard, etc.).
• Payment processor fees: Charged by the merchant’s payment processor for handling the transaction.

These fees can add up, significantly impacting a business’s bottom line. By passing some or all of these costs onto customers, merchants can reduce operational costs and maintain competitive pricing. 

When merchants talk about passing credit card fees onto customers, they are usually considering charging convenience or surcharge fees. Here is a quick comparison between the two, with more details in the following section. 

Is it legal to charge a convenience fee?

Is it legal to charge a credit card processing fee? Please read on.

A convenience fee is an additional charge that a business adds to a transaction when a customer uses a non-standard payment method. For example, a company might apply a convenience fee for payments made over the phone or online, rather than in person.

In the United States, convenience fees are permitted but must adhere to specific card network rules such as:

• Disclosure: The fee must be clearly disclosed to the customer before the transaction is completed.
• Application: The fee should be applied uniformly and not selectively.
• Reasonable amount: The fee must be reasonable and reflect the cost of processing the transaction.

However, it is crucial for merchants to check the specific rules of each card network (Visa, MasterCard, American Express, Discover) and ensure compliance with state laws, which can vary significantly. Some states have stricter regulations on these fees, so understanding local laws is essential.

Is it legal to charge a credit card processing fee? For more details, refer to our comprehensive guide on convenience fees.

Is it legal to charge a surcharge fee?

A surcharge fee is an additional charge that a merchant adds to a transaction when a customer chooses to pay with a credit card. Unlike convenience fees, which can be used for different alternative payment methods, surcharges specifically offset the cost of credit card processing.

The legality of surcharge fees is more complex and is subject to various rules and regulations:

• Federal law: In the United States, surcharges are permitted under federal law but must comply with specific requirements set by credit card networks and state laws.
• Card network rules: Each card network (Visa, MasterCard, American Express, Discover) has its own set of rules regarding surcharges. They outline when and how surcharge fees need to be disclosed, maximum allowable fees (around 4%), and registration requirements. 
• State laws: While they can be implemented in most of the US, there are still a few states that prohibit or restrict credit card surcharges. 

For a more detailed discussion on the rules and regulations, refer to our comprehensive article on merchant surcharging.

Is it legal to charge credit card processing fees outside of the US?

As you probably presumed, each country has its own set of regulations. Here’s a brief overview of the rules in Canada, Australia, and the European Union:

• Canada: Merchants across Canada are allowed to use surcharges (with the exception of Quebec). The fees must be clearly disclosed to the customer and the surcharge cannot exceed 2.4% or the cost of acceptance, whichever is lower. Additionally, merchants must provide customers with alternative payment methods that do not incur a surcharge.
• Australia: In Australia, merchants can charge a surcharge fee, but it must reflect the actual cost of processing the payment. The Australian Competition and Consumer Commission (ACCC) regulates these fees to ensure they are not excessive. Businesses are required to provide clear information to customers about any surcharges before completing the transaction.
• European Union: The EU has stricter regulations regarding credit card surcharges. As of January 2018, the EU Payment Services Directive (PSD2) prohibits merchants from charging surcharges on consumer credit and debit card transactions within the European Economic Area (EEA). However, surcharges may still be applied to certain corporate card transactions and non-EEA cards.

Understanding and complying with these international regulations will be crucial for merchants who operate globally. 

How to legally charge a fee for using a credit card

Is it legal to charge a credit card processing fee? Yes, here’s a step-by-step guide on how to implement credit card processing fees legally and effectively (in places where they are legal). 

Note that certain card issuers or states might require you to jump through some extra hoops.

Register with card brands

Before you can start charging a fee for credit card transactions, you need to register with the major card brands — Visa, MasterCard, American Express, and Discover. Each brand has specific requirements and guidelines. 

Steps to register:

1. Understand the guidelines: Each card brand has its own rules regarding surcharges and convenience fees. Make sure you thoroughly review these guidelines to ensure compliance.
2. Notify the card brands: You typically need to provide at least 30 days’ notice to the card brands before you start surcharging. This involves filling out a registration form, which is usually available on the card brand’s website.
3. Provide detailed information: You’ll need to include details such as your business name, merchant identification number, and the specific surcharge amount you intend to apply.
4. Wait for approval: After submitting your registration, you may need to wait for confirmation or approval from the card brands before you can begin surcharging.

Failure to comply can result in fines or losing your ability to accept credit card payments. However, your payment processor should be able to help you stay compliant. 

For example, here at SecureGlobalPay, we work closely with our merchants to help them implement various types of payment processing programs. 

Configure your POS system and payment gateway

Once you have registered with the card brands, the next step is to configure your Point of Sale (POS) system and payment gateway to correctly implement the surcharge.

Most of the heavy lifting here should be done by your payment processor. You’ll work with them to update existing or set up a new POS system to automatically apply the surcharge to applicable credit card transactions. Make sure the fee is not higher than 4%.

Similarly, if you take payments online, your payment processor will need to ensure that your payment gateway is properly configured.

Lastly, we encourage merchants to perform several test transactions to ensure that the surcharge is being applied correctly and that it is clearly itemized on customer receipts. This helps to identify and resolve any issues before going live.

Set up proper signage/notice

Informing your customers about the credit card surcharge is not just good practice — it’s a requirement. Here’s how to do it right:

1. Create clear signage: Design signs that clearly state that a surcharge will be applied to credit card transactions. The message should be straightforward and easy to read, indicating the percentage or fixed amount of the surcharge.
2. Place signage prominently: Position signs at key locations within your business, such as at the entrance, near the checkout, and on the payment terminal screen.
3. Include surcharge information on receipts: Ensure that the surcharge is itemized on customer receipts. The receipt should show the transaction amount, the surcharge, and the total amount charged.
4. Online notification: If you accept payments online, display the surcharge notice on your website, particularly on the payment page. Ensure customers see the notice before they complete their purchase.

Setting up proper signage and notices ensures that customers are well-informed about the surcharge, promoting transparency and compliance with regulatory requirements.

Exclude debit card purchases

One critical aspect of legally charging a fee for credit card transactions is ensuring that debit card purchases are not subject to the surcharge. 

Follow these steps to ensure compliance:

1. Understand the difference: Make sure you and your staff can distinguish between credit and debit card transactions. While debit cards can sometimes be processed as credit transactions, they should not be subject to the surcharge.
2.  Make sure your POS system and gateway are properly configured: Your online payment gateway and your POS system should automatically recognize and exclude debit card transactions from the surcharge. 
3. Monitor transactions: Regularly review transaction reports to ensure that surcharges are not being applied to debit card purchases.

Provide a proper receipt

A proper receipt helps customers understand the total cost of their transaction and verifies that the surcharge was applied correctly. 

Alongside all of the standard details (date, time, merchant’s name and contact, payment method), you’ll want to ensure the receipt explicitly lists the surcharge as a separate line item with: 

1. The amount of the original transaction
2. The surcharge amount
3. The total amount after the surcharge is applied

With this, you’re pretty much all set.

Eliminate credit card processing fees with SecureGlobalPay

SecureGlobalPay is a leading payment processing provider that helps low and high-risk merchants accept payments and reduce their credit card processing fees. 

We offer a range of programs designed to allow merchants to retain more of their revenue:

1. Merchant surcharge programs
2. Convenience fee programs
3. Cash discount programs
4. Dual pricing
5. Interchange optimization
6. Level 2 and Level 3 Processing
7. Secure payment gateway

Let us handle your payment processing needs so you can focus on growing your business. Reach out to learn more about our programs, or simply fill out this merchant application form.