Merchant Surcharging Rules

What is a Surcharge?

• A surcharge is a fee that merchants may assess on credit card transactions to help offset the cost of processing. The customer will pay more than the listed price.
• Merchant surcharging has been permitted since 2013.
• Visa and Mastercard modified their ‘No Surcharge Rule’ due to a settlement agreement with merchants, Visa and Mastercard now allow merchants to surcharge on credit card transactions; however, merchants must adhere to certain rules and limitations.

Click here for the Merchant Surcharge Q&A. 

Click here to learn about Minimum Transaction Amounts. 

What is Cash Discounting?

• A cash discount is a discount offered on posted prices for customers paying with cash. The customer will pay less than the listed price.
• Merchants are not permitted to post a price for cash and then charge a higher price for cards.
• A merchant may charge either a surcharge or apply a cash discount, but not both. 

Surcharges, Convenience Fees and Service Fees

A surcharge is not a convenience fee. A convenience fee is a charge passed on to customers for the privilege of paying for a product or service using an alternative payment method that is not standard for a business. A business that traditionally accepts cash or checks for transactions but also offers credit card payments for convenience may charge an additional fee for that convenience.

A service fee is a type of convenience fee program with a modified set of rules.

Surcharge Fee:

• Allowed on CNP and CP transactions
• Fee is a percentage of the sale, not to exceed the lesser of merchant’s historical discount or brand’s posted cap.
• Included in total sale but needs to be a separate line item on receipt
• Applies only to consumer and commercial credit cards. Debit and prepaid cards are not eligible.
• Competing brands should also be surcharged if contract allows
• Merchant must provide prior notice to Visa and Mastercard prior to implementation

Convenience Fee: Visa General Program

• Allowed only for CNP transactions. Fee is flat or fixed amount
• Included as part of total sale
• Allowed on credit and signature debit

Convenience Fee: Visa Government and Higher Education

• Allowed on CNP and CP transactions
• Fee may be variable on credit or commercial cards
• Processed as a separate transaction
• Registration required

*Surcharges cannot be applied in addition to convenience fees and vice versa

Service Fee:

• A government agency or education Merchant, or its third party, that is both registered with Visa and assigned a unique Merchant Verification Value.
• If assessed by a Merchant, may be processed as a separate Transaction
• If assessed by a third party in a Card-Absent Environment, must be processed as a separate Transaction.

Possible Merchant Considerations

• Potential impact on the customer experience
• Ensure credit card processor supports surcharging
• What competitors are doing
• Disclosure requirements to the customer
• Ensure it does not exceed the cost of acceptance brand by brand
• State/local laws supersede card brand rules. A merchant is responsible for determining whether its practices comply with state and local law and should confer with their legal counsel with any questions.

Cost of Acceptance

The cost of acceptance is also known as the Merchant Discount Rate. A merchant may determine their costs by reviewing processing statements. To determine cost of acceptance, the following may be taken into consideration:

• The interchange rate
• Network set fees associated with the processing of a transaction
• Network set fees associated with the acceptance of the network’s brand
• Acquirer set fees associated with processing a transaction

*Merchant calculation may not include fees for POS terminal rental, etc.

Flat Fee vs Percentage

A flat fee can be charged provided it does not exceed the merchant’s cost of acceptance and never exceeds 4% of any sale (Visa/MC). 

Ensuring these caps are not exceeded might make a flat fee difficult to administer for some merchants and may result in non-compliance.

The Rules

• Merchants MUST register with Visa and Mastercard and notify their acquirer within a minimum of 30 days prior to assessing a surcharge for any card Discover and American Express do not require registration.

Visa Registration website:

merchant-surcharge-notification-form | Visa

Mastercard Registration website:

Merchant Surcharge Disclosure Webform | Credit Card Surcharges (mastercard.us)

• Merchants are required to disclose their surcharge policy at the point of store entry and the point of sale prior to the purchase transaction being.
• The surcharge amount must be included in the transaction However, the merchant must disclose the amount of the surcharge separately on the customer’s transaction receipt.

For merchants accepting competing card brands other than Visa and Mastercard, the concept of ‘level playing field’ comes into play.

• Discover has a non-discrimination policy which states it is permissible to surcharge on Discover transactions if all competing cards are surcharged as well; hence the level playing field concept. Discover surcharge cannot exceed the Cost of Acceptance for the credit card sale.
• Amex has a non-discrimination policy, but their regulations require imposing equal treatment across all Other Payment products. A payment product is defined as any charge, credit, debit, stored value, prepaid, smart card, account access devices or other payment cards, services or products other than the Card. Since the Amex requirement includes debit and prepaid products and it is against Visa and Mastercard rules to surcharge debit and prepaid products, merchants wishing to charge a surcharge would be considered non-compliant (from an Amex rules perspective) in certain scenarios.
• Visa and Mastercard are not subject to the “level playing field” concept since both allow surcharging. A merchant may surcharge either one of the brands or both. The merchant cannot charge more than the cost of acceptance for their card brand and cannot exceed 4% (even in cases where the merchant’s cost of acceptance exceeds 4%).

Disclosure Requirements

A merchant must disclose its surcharge policy in a manner that does not disparage the brand, network, issuing bank or payment card product being used and must state:

• The surcharge is being imposed by the merchant.
• The surcharge is not greater than the applicable merchant discount rate at the merchant location.
• Consumers must be given the opportunity to opt out of the sale or pay by other means before the surcharge is added to the sale.

• Click here for the Merchant Surcharge Q&A. 
• Click here to learn about Minimum Transaction Amounts.