A Merchant Guide to Surcharge Programs

While cash may be king, credit cards are still the preferred payment method for many customers. Merchants of all sizes who process credit cards face transaction fees from the card brands, and the average cost can range anywhere from 1% to 4%. These fees can add up to hundreds, if not thousands, of dollars for businesses.

In 2013, a class-action lawsuit brought by retailers against Visa and Mastercard resulted in a settlement allowing merchants in the U.S. to surcharge credit card transactions. Now, merchants can implement a surcharge program to offset some of the payment processing costs. This program allows a merchant to add a surcharge fee to the cash price of a product or service for a customer paying with a credit card. The surcharge amount is capped at the merchant’s actual cost of processing credit cards, or 4%, whichever is lower. 

It is important to note that surcharging is legal under federal law, but merchants in Connecticut, Massachusetts, and Puerto Rico cannot implement this fee. In addition, the ability to surcharge is only applicable to credit card purchases and cannot be imposed on debit or prepaid card purchases.

Merchants intending to surcharge must notify the payment card networks via their acquirer at least 30 days before implementing the fee. There are also additional payment card network requirements for surcharge disclosure at the merchant location, for a surcharge line item on the transaction receipt, and for product and message certification to ensure that the surcharge amount is correctly identified and passed in the authorization and clearing records. Due to this requirement by the payment card networks, merchants must ensure they are using a point-of-sale system capable of supporting this feature.

For merchants implementing a surcharge program, we recommend these steps:

1. Complete the merchant surcharge registration form.
2. Complete certification to surcharge with your payment processor.
3. Display prominent and clear signage of intent to surcharge (icons on door, POS, receipt), including the surcharge amount and that the surcharge is not greater than your discount rate.

Failure to be compliant could mean the removal of your merchant account, so knowing the ins and outs of a surcharge program and how it can benefit your business is crucial. Companies with an array of products and services, such as convenience and retail stores, spas and salons, restaurants, and bars, could benefit from surcharge programs if implemented successfully.

Connect with Us

With business activities in 50 markets and 150+ currencies around the world, EVO is among the largest fully integrated merchant acquirers and payment processors in the world.

Contact Us