Four mechanisms, four rulebooks
The words get used interchangeably, but the card networks treat these as different things with different rules:
| Mechanism | What it is | Who may use it | Key constraint |
|---|---|---|---|
| Surcharge | A fee added to the price when the customer pays with a credit card | Any merchant, except where state law prohibits it | Credit cards only; capped; advance notice to the networks; disclosed before the sale and on the receipt |
| Cash discount | A reduction from the posted price when the customer pays with cash (or, if you choose, debit or ACH) | Any merchant, anywhere in the US | The posted price must be the card price; the discount comes off it. Raising the price at the register for cards is a surcharge in disguise |
| Convenience fee | A flat fee for the convenience of paying through an alternative channel the merchant does not normally offer | Merchants whose primary channel is different from the one being charged for | Flat amount, not a percentage; applied to all payment methods in that channel; disclosed before the transaction; not for recurring |
| Service fee | A percentage fee charged by a registered third-party provider on behalf of government, education and a few other categories | Merchants in eligible merchant category codes, through a registered program | Only the eligible categories; only through the network-registered programs |
Everything below is organized around these four. If a sales representative offers you a "cash discount program" that adds a percentage at the register for card payments, they are describing a surcharge with a different name, and the surcharge rules apply.
Surcharging: the network rules
Surcharging on credit cards has been permitted under Visa and Mastercard rules since 2013, as a result of the antitrust settlement between the networks and merchants. The permission comes with conditions, and Visa tightened the cap in 2023.
| Rule | Visa | Mastercard | What it means in practice |
|---|---|---|---|
| Cards that may be surcharged | Credit cards only. Debit and prepaid cards may never be surcharged, even when they are run as "credit" without a PIN. | Same | Your system must identify debit and prepaid BINs and suppress the surcharge. A flat surcharge on everything is a violation on every debit transaction. |
| Maximum surcharge | 3% of the transaction, or your cost of acceptance for that card, whichever is lower (reduced from 4% in April 2023) | 4%, or your cost of acceptance, whichever is lower | Since you must treat the brands the same, the effective cap is 3%. Most merchants' cost of acceptance is below 3% anyway, and the cap is the lower of the two. |
| Cost of acceptance | Your average effective rate for that brand (or product) over the preceding month or year | Same idea | A merchant paying 2.4% all-in may surcharge 2.4%, not 3%. Keep the statement that supports the number. |
| Brand level or product level | You may surcharge all Visa credit cards at one rate (brand level) or specific products (for example, only rewards cards) at their own rates (product level), but not both | Same | Nearly everyone uses brand level. Product level requires BIN-level identification and is rarely worth it. |
| Equal treatment | If you surcharge Visa you must surcharge competing brands at the same level, unless a brand's rules or your cost make that impossible | Same | You cannot surcharge Mastercard but not Visa, or surcharge both but not American Express if you accept it and its rules allow. |
| Notice to the networks | Notify your acquirer at least 30 days before you begin | Notify Mastercard and your acquirer at least 30 days before | Your processor usually has a form. Do not start before the 30 days run. |
| Disclosure at the door | Clear disclosure at the point of entry and the point of sale for in-person merchants, and on the website before checkout for online merchants, stating that a surcharge applies to credit cards and the amount | Same | A sign at the entrance, a sign at the register, and a notice on the checkout page that shows the percentage. |
| Disclosure on the receipt | The surcharge appears as a separate line item with the amount | Same | It cannot be blended into the price. |
| Refunds | The surcharge is refunded in proportion to any refund | Same | A full refund returns the full surcharge. |
| Where prohibited | Not permitted where state or local law prohibits it | Same | See the state table below. |
Network rules as of the time of writing. American Express and Discover permit surcharging under their own non-discrimination rules; the practical requirement is to treat them the same as Visa and Mastercard.
Two mistakes account for most surcharge violations: surcharging debit cards, and surcharging above the cost of acceptance. Both are things a payment platform can enforce automatically if it identifies the card type at authorization and knows your rates.
Surcharging: the state picture
A decade ago ten states banned surcharges. Courts struck down several of those bans as restrictions on commercial speech, and some states have since replaced them with disclosure and cap requirements. The map keeps changing, and a business selling into several states needs to check each one. As of the time of writing:
| State | Status | Notes |
|---|---|---|
| Connecticut | Surcharges prohibited | Cash discounts allowed. |
| Massachusetts | Surcharges prohibited | Cash discounts allowed. |
| Maine | Surcharges prohibited | Cash discounts allowed. |
| Puerto Rico | Surcharges prohibited | |
| Colorado | Permitted with a cap | Surcharge limited to 2% of the transaction or the merchant's actual cost of acceptance, with disclosure, under a 2022 law. |
| New York | Permitted with disclosure | Since 2024 the merchant must display the total price inclusive of the surcharge, or a clear "credit card price" alongside the cash price; a surcharge added at the register to a posted price is not allowed. Cap at the merchant's cost of acceptance. |
| New Jersey | Permitted with a cap and disclosure | A 2023 law caps the surcharge at the actual cost of acceptance and requires disclosure before the sale. |
| California | Effectively restricted | The all-in pricing law in force since July 2024 requires the advertised price to include all mandatory fees. A card surcharge added at checkout to a lower posted price does not comply; a posted card price with a cash discount does. |
| Minnesota | Effectively restricted | An all-in pricing law in force since January 2025 works the same way as California's. |
| Florida, Texas, Kansas, Oklahoma | Bans struck down or unenforced | Earlier bans were held unconstitutional or are not enforced; network rules and disclosure requirements still apply. |
| All other states | Permitted under network rules | Subject to each state's general consumer-protection and deceptive-pricing laws. |
As of the time of writing. State legislatures revise these laws frequently; confirm before launching, and confirm again each year.
The trend in the newer laws (New York, California, Minnesota) is toward all-in pricing: whatever price the customer sees first must be the price they can pay. A surcharge program that survives that test looks like a cash discount program: post the card price, and take something off for cash.
Cash discounts, and the disguised-surcharge problem
Offering a discount for cash has always been legal, is protected by federal law (the Durbin amendment expressly allows discounts for cash, check, debit, or a particular network), and is permitted by every state. The network rules for a cash discount are simple: the posted price is the card price, and customers paying by cash receive a discount from it.
The trouble is the product sold to small businesses as a "cash discount program". Many of them work like this: the terminal adds a percentage (often 3.5 to 4 percent) to the posted price when a card is presented, and the receipt calls the difference a "cash discount" or a "non-cash adjustment". Visa addressed this directly: if the posted price is the cash price and an amount is added for card payment, that is a surcharge, whatever the receipt calls it, and every surcharge rule applies: credit only, capped at 3 percent, noticed to the acquirer, disclosed at the door. A program that adds 4 percent to debit cards and calls it a non-cash adjustment breaks three rules at once.
A genuine cash discount program that stays on the right side:
- Every posted price, on shelves, menus, estimates, invoices and the website, is the price a card-paying customer pays.
- The discount is offered at payment and shown on the receipt as a discount from that price.
- Debit can be included in the discount if you want to steer customers to it, since discounts (unlike surcharges) may distinguish debit from credit.
- Signage says "discount for cash", not "fee for cards".
Some terminals and platforms implement "dual pricing", displaying both a card price and a cash price for every item. Done with the card price as the base and both prices visible before the customer chooses, it satisfies the network rules and the all-in pricing states, and is the cleanest form of the idea.
Convenience fees
A convenience fee is not a way to recover processing costs; it is a charge for a genuinely different way of paying. Visa's rule is the strict one and most acquirers apply it across brands:
- The fee is for a bona fide convenience: an alternative payment channel outside the merchant's customary one. The classic case is a business that normally takes payment in person, or by mail, offering payment online or by phone for a fee. A business whose customary channel is online cannot charge a convenience fee for paying online.
- It is a flat amount, not a percentage, and is reasonable in relation to the convenience.
- It is applied to every payment method accepted in that channel, not just cards. Charging the fee for cards and waiving it for ACH turns it into a surcharge.
- It is disclosed before the transaction and the customer can cancel without paying it.
- It is charged by the merchant, as part of the transaction, not as a separate charge.
- It is not charged on recurring or installment payments.
Mastercard's rules on who may charge a convenience fee are less prescriptive, but the same disclosure and flat-fee expectations apply, and because you must treat brands consistently, Visa's rule is the one to design for. Convenience fees suit a narrow set of businesses: a landlord or utility taking rent or bills online when the customary channel is a check, a school taking online tuition payments. For most businesses whose customary channel is already online or in person, they do not fit.
Service fees for government and education
Government agencies, courts, tax authorities, schools and colleges, and a few related categories may charge a percentage service fee on card payments through programs the networks register specifically for those merchant category codes. The fee is typically charged by a registered third-party service provider rather than by the agency itself, may be a percentage, and appears as a separate transaction or line. If you are in one of these categories, your acquirer will have a registered program; if you are not, service fees are not available to you and a percentage fee on card payments is a surcharge, with the surcharge rules.
Disclosure: what goes where
Whichever mechanism you use, the customer must know before they choose how to pay. A checklist by touchpoint:
| Touchpoint | Surcharge | Cash discount | Convenience fee |
|---|---|---|---|
| Entrance signage (in person) | Required: "A surcharge of X% is added to credit card payments. It is not more than our cost of acceptance. No surcharge on debit." | Recommended: "We offer a X% discount for cash." | Not applicable (channel is not in person) |
| Point of sale | Required, same wording | Recommended | Required, before the customer commits |
| Website and checkout | Required before checkout, stating the percentage and that it applies to credit only | Recommended, stating the discount | Required on the page where the fee is incurred, before the customer commits, with the ability to cancel |
| Estimates and invoices | State that a surcharge applies to credit card payments and the percentage, or show card and cash totals | Show the posted (card) price and the cash discount amount | State the flat fee for the online or phone channel |
| Receipt | Separate line: "Credit card surcharge X%: $Y" | Separate line: "Cash discount: -$Y" | Separate line: "Convenience fee: $Y" |
| Payment terminal or hosted page | Show the surcharge amount and total before the customer confirms | Show the discount if the customer chose cash or debit | Show the fee and total before the customer confirms |
Two further points. Sales tax treatment of surcharges and fees varies by state; in many states a surcharge is part of the taxable sale price, so check with your accountant before configuring the terminal. And keep the acquirer notification, the signage photos, the checkout screenshots and the monthly statements that justify the rate: if a customer complains to the network, the acquirer will ask for them.
Should you do it at all?
Surcharging recovers 2 to 3 percent on credit card sales. Whether that is worth it depends on what it costs you in sales and goodwill, which varies enormously by business type.
- Where it tends to work: business-to-business invoices, where customers expect to see the fee and often switch to ACH; professional services with high tickets and low price sensitivity; government-like payments where customers have no alternative supplier.
- Where it tends to backfire: retail and restaurants with competitors next door; e-commerce, where a fee revealed at checkout is the most common reason for cart abandonment; any business that depends on reviews.
- What it costs to run: BIN-level debit detection, per-brand rate tracking, signage, receipt formatting, a state-by-state check, and the 30-day notice. A platform that does these for you removes most of the effort; doing it by hand on a basic terminal is where the violations happen.
Three alternatives often deliver more than a surcharge with none of the friction:
- Lower the cost instead of passing it on. Moving to interchange-plus pricing, fixing downgrades and removing junk fees can cut the effective rate by half a point or more; see reading your merchant statement.
- Steer large payments to ACH. A bank debit costs a flat fee under a dollar rather than a percentage. Offering ACH as the default on invoices over a threshold, with cards as the alternative, saves more than a surcharge on those payments and customers rarely object.
- Offer a cash or ACH discount rather than a card surcharge. Economically similar, legally simpler, and it reads as a reward rather than a penalty.
Where FloPay fits
If you do surcharge, the platform has to enforce the rules on every transaction: identify debit and prepaid cards and suppress the fee, apply the rate per brand, show the amount before the customer confirms on the hosted checkout and virtual terminal, print it as its own line on the receipt and invoice, and refund it proportionally. If you would rather avoid the question, FloPay's ACH and invoicing let you put a bank-debit option next to the card option on every invoice, which for most B2B businesses recovers more than a surcharge would. Talk to us about which fits your customer base before switching anything on.
Pass on the cost, or just pay less of it
FloPay can enforce surcharge rules on every transaction, or put an ACH option next to the card on every invoice so you never need to. Tell us about your customers and we will tell you which one pays off.
See ACH Payments