Business did not notify me about credit card surcharge

Credit card sales allow merchants to enjoy higher sales volumes. However, merchants must pay the networks for enabling this service. It’s common for retailers to pass on this fee to consumers via a surcharge. Swipe fees typically range from 1.5 percent to 3 percent, but should not exceed 4 percent of the merchant’s actual credit card processing costs.

So what happens if a restaurant or other business adds a surcharge but fails to inform you about it? It’s not a simple answer because states can have different rules on credit card surcharges.

Can businesses charge a credit card fee?

Only four states prohibit or limit surcharges on credit cards: Connecticut, Maine, Massachusetts and New York, along with Puerto Rico. It’s illegal for New York merchants to separately list the pre-surcharge subtotal or even the separate line item surcharge amount.

However, surcharges are allowed in the remaining 46 states.

The case behind credit card surcharges

In 2015, the Central Intercollegiate Athletic Association’s (CIAA) NCAA basketball tournament was hosted in Charlotte, North Carolina. The Ritz-Carlton Charlotte tacked on what it called a CIAA service charge as an automatic gratuity on the tabs of customers in its Lobby Lounge.

After complaints from patrons, the North Carolina Attorney General entered into an agreement with the hotel to refund the charge, donate $75,000 to the CIAA Scholarship Fund and pay $5,000 to the North Caroline Department of Justice for consumer protection efforts, WBTV reported at the time.

In a statement released after the settlement, the Ritz-Carlton Charlotte blamed adding the surcharge on costs to enlarge its Lobby Lounge seating to accommodate the tournament’s large crowds and instituted the service charge as an automatic gratuity.

Rules for credit card surcharges

There are specific rules retailers should follow when it comes to credit card surcharges. In the past, Visa and Mastercard had forbidden merchants from passing on swipe fees to consumers through surcharges. However, after losing a legal battle in 2013 initiated by retailers, the card payment networks had to allow them.

A tentative $30 billion settlement reached in March 2024 would have limited the swipe fees Visa and Mastercard charged merchants. But it was rejected by a judge in June 2024, who wrote that the settlement inequitably benefited smaller merchants at the expense of larger ones.

Before a merchant can start making surcharges on credit card transactions, it has to notify the card network, as well as the bank that authorizes and settles card payments for the merchant, 30 days in advance.

The credit card surcharge should also not be higher than the cost involved to the merchant of accepting a customer’s credit card. In other words, the merchant cannot profit from the surcharge.

Credit card surcharges require adequate disclosure

For states that allow card surcharges, LawPay.com, a payment software company, offered guidelines for swipe fees:

• Notify major credit card institutions — in writing — about your intent to add a surcharge.
• Inform customers that you’re adding a surcharge.
• A surcharge cannot exceed 3 percent. However, Colorado merchants may either add a maximum surcharge of 2 percent or charge the actual cost the company pays for credit processing.
• Do not add surcharges on debit and prepaid cards.
• Surcharges must be listed as separate line items.

Merchants should post notices at their business entrance and point of sale, advising customers about their credit card surcharge policy. Online sellers must disclose on their website that a surcharge will apply where they first mention credit card acceptance.

This promotes transparency, so customers know exactly what they’re being charged for when they pay with a credit card. It also ensures that retailers do not engage in false advertising by citing a lower price and then slapping on a surcharge when the customer pays.

Restaurants, for example, have to abide by such disclosures and cannot quietly tack on a surcharge when you pay your bill. They also cannot only state on their menu that there will be a surcharge for customers paying with a credit card without making the other required disclosures.

Recourse for inadequate credit card surcharge disclosures

If you’ve had the experience of eating at a restaurant or paying at another business that did not adequately inform customers about its credit card surcharge policy, you have recourse.

File a complaint with the card network involved. Follow up with your state’s attorney general or department of consumer protection. And you could file a complaint with the Consumer Financial Protection Bureau.

To support your case, submit evidence of the business’ noncompliance with the law, which could include pictures of the advertised price and your receipt, as well as the merchant’s location and contact information.

The bottom line

Most states allow retailers to pass on credit card swipe fees to customers in the form of surcharges. There are specific disclosures they must make, though, and they can’t just add a surcharge to your bill without notification.

If a business adds a surcharge to your bill without following the required protocol, file a complaint with the relevant authorities with evidence to back up your claim.