Home » Are Debit Card Surcharges Legal? What You Need to Know

If you’ve ever seen a business add a little extra fee to your total when you pay with a card, that’s called a surcharge. Merchants use surcharge programs to cover the costs of credit card processing fees, which can eat into their profit margins. 

But when it comes to debit card transactions, surcharges are a different story. Are they legal? What are the rules, and what can businesses do instead? 

Let’s dive in and clear up the confusion for merchants.

Are debit card surcharges legal?

In the United States, surcharging debit card transactions is not allowed. All major card brands, including Visa and Mastercard, explicitly forbid merchants from adding surcharges to debit card payments — regardless of whether the card is run as a debit card or credit card transaction.

These rules apply across the board to protect consumers from unexpected fees when using their debit cards.

That said, there are a few countries, like Australia and New Zealand, that do allow merchants to apply surcharges to debit card transactions — at least for now. In any case, merchants with offshore accounts that operate internationally should read up on the rules in each country.

In the U.S., federal and state laws also play a role in regulating surcharges. Many states have restrictions on credit card surcharges in general, not just debit and prepaid cards. Businesses that attempt to impose these fees risk various penalties and restrictions.

What are the consequences of not following this rule?

Merchants who add surcharges to debit card transactions in violation of card network rules and state laws can face significant consequences, including:

• Fines and fees: Visa and Mastercard may impose hefty fines on merchants who violate their no-surcharge policies for debit card transactions. These fines can accumulate daily until the merchant corrects the violation.
• Termination of processing agreements: For persistent violations, the penalties can escalate to the suspension or termination of the merchant’s card processing privileges, effectively cutting off their ability to accept card payments.
• State-level penalties: Some states have laws prohibiting surcharges on debit card transactions. Violating these laws can result in legal action and financial penalties.
• Loss of customer trust: Illegally surcharging debit card transactions can lead to customer complaints and damage the business’s reputation, potentially resulting in lost sales and negative reviews.

Whether they do it unknowingly or purposefully, every year, some merchants are caught and fined for violating this policy. 

This is not a surprise as card networks are actively working to identify such violations. Here is an excerpt from Visa’s Merchant Surcharge Q & A:

Visa receives numerous consumer complaints and has a yearly mystery shopping by outside auditors. The Acquirers of merchants who are caught violating Visa’s rules, face potential fines. Moreover, the acquirer of any merchant identified as surcharging improperly may be assessed an immediate US $1,000 fine.

Why adding a surcharge on debit card payments is not allowed

The ban on debit card surcharges exists to protect consumers and maintain fairness in payment processing. Here are some reasons why this practice is prohibited:

• Consumer protection: Debit cards are linked directly to a consumer’s bank account, often used by lower-income customers. Prohibiting surcharges ensures these users aren’t disproportionately burdened by extra fees.
• Transparency: Debit card processing costs are typically lower than credit card fees. Allowing surcharges could confuse customers who might not understand why they’re being charged extra for using a cost-efficient payment method.
• Encouraging debit card usage: Debit cards are a preferred payment method for many customers and businesses. Banning surcharges keeps this option attractive and widely used.
• Compliance with payment network standards: Card networks enforce uniform rules to maintain trust and consistency in payment systems. Allowing surcharges on debit cards would create inconsistencies and erode customer confidence in these systems.

What merchants can do instead to reduce processing fees

If you’re looking to save, there are much better ways to pass on processing fees to your customers than surcharging.

To most merchants we work with, we recommend trying these programs instead:

• Dual pricing: This approach lets merchants display two prices — one for cash payments and another for card transactions. Customers can choose their preferred payment method, with the card price covering the processing fees.
• Cash discounting: Offer customers a discount for paying with cash, which indirectly offsets the processing fees associated with card payments.

They have the same purpose as surcharging but come at it in an opposite way. Because of that, these programs are legal in all states.  

Merchants should shop around for payment processors that offer competitive rates. SecureGlobalPay specializes in helping businesses find the lowest processing fees tailored to their needs. By working with us, merchants can:

• Access competitive interchange rates.
• Implement solutions like cash discounting and dual pricing.
• Reduce their overall processing costs without breaking any rules.

Ready to lower your processing fees and boost your savings? Contact SecureGlobalPay today to explore no-fee processing options and apply for a merchant account.