What Businesses Should Know About Surcharging

In simple terms, a surcharge is a percentage‑based fee that a merchant adds to a transaction when a customer chooses to pay with a credit card. If a merchant charges this fee, it must apply to transactions of any size and all customers. Merchants use surcharges to recover some or all of their credit card processing costs.

Surcharging is often confused with convenience fees, service fees or cash discounts. These pricing alternatives can also offer cost savings and/or customer incentives; however, these charges relate to different payment methods, industries and fee structures.

Card networks maintain their own detailed rules that govern how surcharges may be applied, capped, disclosed and registered. Federal and state laws also apply. When implemented correctly and compliantly, surcharging can be a valuable tool in your cost management strategy. It has been widely adopted in various industries across most of the United States.

Compliance Is critical

Surcharging is part of a complex and changing regulatory environment. The most common mistakes happen when businesses attempt to manage the program themselves and don’t follow regulations. Non-compliance can result in card brand fines or even termination of your merchant account.

Card types

Surcharging can only be applied to credit card transactions. Payments made by debit cards—even debit cards that are run as “credit” at the point of sale—pre-paid “gift” cards or HSA/FSA cards aren’t eligible. Rules can also vary by card brand, so be sure that your program follows the rules for any brands you accept.

State restrictions

As of May 2026, surcharging is allowed in most U.S. states and territories. Some areas prohibit surcharging entirely, and others have differing regulations about maximum allowable surcharge, taxes and disclosures. Note that location is determined by both the vendor's location and, in the case of card-not-present transactions, the card's billing ZIP code. Because these regulations change frequently, careful and consistent oversight is needed to ensure compliance.

Disclosure of surcharges

Customers must be informed of a potential surcharge at several points along their purchase path. Card networks generally require disclosure at the point of entry (such as signage or a website notice), at the point of sale before the payment is completed and on the receipt as a separate line item. These requirements apply to all transaction methods, including in‑person transactions, e‑commerce, phone payments, text‑to‑pay and invoice‑based payments.

Consistent application

Surcharging must be applied consistently to all transactions within the same merchant account. This means businesses can’t forgo the fee for specific customers or set dollar thresholds. For multiple locations or business lines, such as a parts department and a service department, you may be able to set up different merchant accounts and vary surcharging behavior.

Other compliance considerations

Beyond these broad categories, there are other regulations that merchants must follow to stay compliant.

• You must register with card brands before implementing a surcharging program.
• Fee must be a percentage, not a flat dollar amount.
• Sales tax may be eligible for surcharging—check with state regulations.

In short, there are many nuanced regulations, and a lot is at stake. If your business is interested in surcharging, a managed program that handles these details for you may be a good option.

Why managed surcharging matters

Managing surcharging on your own can be risky. Laws and card‑brand rules change regularly, and mistakes can be expensive. A managed program automatically …

• Identifies card type using BIN data.
• Applies state‑specific caps correctly.
• Suppresses surcharges where prohibited.
• Handles required card brand registration.
• Keeps track of current regulations and adjusts accordingly.

For businesses that process payments across multiple channels or states, managed solutions remove the guesswork and significantly reduce risk exposure.

How customers respond

One common concern is how customers react to surcharges. However, the data from 2025 tells a reassuring story. At Fiserv, 95% of merchants remain enrolled after adopting surcharging.

Transparency and clear communication are key. Debit card usage often increases when surcharges are disclosed clearly, creating additional savings opportunities. Merely offering alternative payment methods like debit or ACH reduces friction. When customers understand their options, the impact on their experience is minimal.

Is surcharging right for every business?

Surcharging is used successfully across industries—from restaurants and auto repair shops to healthcare providers and B2B companies—in every eligible state. The best indicator of success is understanding your customer base and keeping lines of communication open.

A thoughtful approach is key. Surcharging is a pricing strategy that requires care. Done thoughtfully, it can offset acceptance costs while preserving transparency and customer trust. Done poorly, it can lead to compliance risk, customer disputes and reputational damage.

Understanding the rules, staying current and choosing the right implementation approach are what separate successful surcharge programs from problematic ones.

Take the next step

Associated Bank and Fiserv can help you evaluate, implement and manage a compliant surcharge program. Contact your treasury management officer or email Treasury@AssociatedBank.com to start the conversation.