True Surcharge
Credit Card Surcharge Definition
A "credit card surcharge" is an additional fee charged to customers who choose to pay with a credit card. It offsets the cost of credit card processing. It must comply with card brand rules, state laws, and be transparently disclosed to customers at the point of sale.
It’s essential to differentiate between a credit card surcharge, which is the focus of this document, and a general “surcharge.” See the Legal & Compliance section for more details.
Prices
- Prices listed are the credit card or “non-cash” price on menus, online, and advertisements.
- A discount is applied for cash payments at checkout.
Legal & Compliance
- Compliant with all federal, state, and local laws. Surcharges are prohibited in a few states (e.g. MA, CT, PR).
- Not applicable under MN Statute 325D.441: Credit card surcharges are NOT mandatory fees because they are avoidable by the guest.
- Compliant with card brand rules. You must notify your payment processor 30 days in advance of implementing surcharging. The processor facilitates required card network registration.
- MN law requires that surcharges be disclosed to customers, including written and verbal notification where applicable. See MN Statute 325G.0513 for disclosure requirements
Offsetting Fees & Savings
- Credit card surcharges are capped at a maximum of 3%.
- No surcharges are allowed on debit/pre-paid cards or non-credit card payment types (e.g. cash, check).
Isn't the 3% cap just for Visa®?
No, all card brands must be capped at 3%. Card brand rules require “equal treatment” across all brands for things like amount minimums, brand acceptance, and surcharges.
Did you know? You can use the Menu Minder™ tool to adjust your pricing and best leverage Cash Discount.
Disclosures: Signage, Checks, Receipts, and Online Store
- Card brands require a sign notifying customers at each door/entrance and at the point-of-sale1.
- Online sales require surcharge disclosure on the first page that shows the card brand options (e.g., in the footer) and during checkout so that the surcharge amount is clearly stated and accepted prior to finalizing the purchase.
- The surcharge must be automatically applied by payment type using “BIN” lookup technology to differentiate cards as credit or debit.
Receipts & Checks
- Receipts must show the surcharge percentage applied before payment.
- Receipts must show the surcharge as a clearly labeled fee (e.g., "Credit Card Surcharge: 3%")
- Receipts must list the surcharge as a separate line item after payment.
Example receipt message: "A surcharge of 3% is applied to credit card transactions, which is not greater than our cost of acceptance. We do not surcharge debit cards".
Taxes and Tips
- Surcharges are considered revenue in most states, and sales tax is calculated on the full transaction amount, including the surcharge.
- Additional revenue from a surcharge may result in higher sales tax but is offset by corresponding expenses for payment processing costs, leaving the business’s net taxable position effectively unchanged.
- Tips are applied by the guest after a card payment is processed, meaning you will pay processing fees on tips
Note: Some states allow “Credit Card Tip Fees”, where businesses charge processing costs to tipped employees. MN law as of 8/1/24 does not allow Credit Card Tip Fees2.
References
- https://www.ag.state.mn.us/Price-Transparency/PriceTransparencyLaw_FAQ.pdf
- https://www.dli.mn.gov/tips
- https://www.revisor.mn.gov/statutes/cite/325g.051
