Overview
What is surcharging?
Surcharging is a fee that businesses apply when a customer pays with a credit card, instead of with cash or a debit card. This fee helps offset the processing costs that the business incurs from the credit card company. The surcharging fee is based on the subtotal cost and does not include taxes/tips and is only applicable to credit card transactions.
You can apply surcharge fees for credit card payments in person, over the phone, and for online transactions. You can implement a fee up to 3% for your credit card payments. Once you enable that, PatientNow will automatically calculate and apply the appropriate fees to credit card transactions.
*Note: This feature is available to clients that utilize Payrix for their merchant processing
Is surcharging legal?
Surcharging is legal in most U.S. states, but prohibited or restricted in a few. Always check local regulations to ensure compliance before implementing surcharging. Credit card companies–Visa, American Express, Mastercard, and Discover–also each handle surcharging differently.
See Regulations for more details.
How should businesses inform their customers about surcharges?
Businesses must clearly disclose the surcharge before the payment is processed. This can be done through signage at the point of sale & during the online checkout process. Some customers may also want to email their existing clients about this change. We have examples of signage and emails here and here. Visa also has templates here.
Can I start implementing surcharging as soon as I enable the feature?
After a 30-day notice period to Visa, Mastercard, and your clients you would be able to surcharge clients who pay using credit cards.
Pitch + Key Benefits
As a business owner, managing credit card processing fees can be challenging and costly. To offer the convenience of credit card payments while keeping your costs in check, you can adopt a cost-sharing strategy. This approach lets you pass on a portion of credit card processing fees to your customers, helping you manage rising expenses without compromising your business’s financial health.
Cost-sharing helps you:
Keep your list prices competitive – Cover credit card processing fees without needing to increase your overall pricing of service and products. This helps you maintain an edge in the market, attracting more customers while protecting your bottom line.
Cut down on operational costs– By sharing processing fees with customers, you can reduce operational expenses, ensuring more of each sale stays in your pocket.
Offer flexible payment options for every customer–Provide the convenience of credit card payments while giving fee-conscious customers the option to save by paying with cash or debit.
Best steps for success after I purchase surcharging
Understand Legal and Compliance Requirements
Research State and Local Regulations: Surcharging is regulated differently by state, so verify whether it's allowed in your location and the maximum rates permissible.
Follow Card Network Rules: Credit card networks (Visa, Mastercard, etc.) have their own requirements for surcharging. Make sure to comply with their guidelines.
Register – MasterCard’s notification requirements direct you to use this form 30 days prior to activating a surcharge program.
Calculate your Surcharge Rate
Customize Your Processing Costs: Your surcharge cannot exceed the cost you incur for credit card acceptance. This is capped at 3%.
Inform your customers in advance.
Send Notifications: Use multiple channels like email and website updates to notify customers well in advance. Highlight the Reasons: Explain why the surcharge is being added (e.g., rising card processing fees) and emphasize that customers can avoid it by using cash or debit.
Update Signage: Clearly display notifications at points of sale—on doors, near registers, and on checkout pages.
Train your staff to effectively communicate.
Make sure your team knows how the surcharge works, why it's being implemented, and which transactions it applies to.
Prepare Scripts for Explaining to Customers: Equip staff with a simple, friendly script for explaining surcharges to customers and helping them navigate alternative payment options.
Regulations
Note that credit card surcharge permissions may vary by state, regulatory, or card network rules. Please note: Laws are always evolving, so remember we are not giving legal advice. For that, it's best to chat with a lawyer. By enabling surcharging, customers acknowledge and agree that it is your sole responsibility to meet all legal and card network requirements.
Credit Card Network Rules:
Mastercard:
Both networks allow surcharges but require merchants to notify them in advance (usually 30 days) and to clearly disclose surcharges to customers at the point of sale.
Surcharges must not exceed the merchant’s cost of accepting the card, with a cap of 3%.
American Express:
Amex allows surcharges but has stricter rules about transparency and how they are applied. The surcharge rate must not be higher than the rate applied to Visa and Mastercard.
Discover:
Discover allows surcharging, but merchants must ensure that they comply with the rules of other networks if they are surcharging those cards as well.
State by State Rules
Surcharging credit card transactions is illegal in the following states and territories: Connecticut, Maine, Massachusetts, New York, and Puerto Rico.
Illinois, Colorado, Georgia, Kansas, Texas, Nevada, New York, South Dakota, New Jersey, Minnesota, California, Florida, Oklahoma, Michigan, and Montana allow surcharging with certain contingencies.
We recommend customers look up their own state regulations. This is a helpful law website to refer to.
Signage
Customers need to be informed of surcharging, which necessitates the need for plenty of credit card surcharge signs at your store—whether brick-and-mortar or online. Signs should be clear and visible, so customers don’t have to go looking for them, and large enough so that customers can’t miss them.
When deciding on what kind of wording to use, keep in mind that you need to have two signs: both a point-of-entry disclosure and a POS disclosure. The latter is a sign that’s clearly displayed when a customer enters your store, and the other is a sign next to, or near where customers checkout
If a merchant doesn’t display a credit card surcharge sign and imposes a surcharge, they may be violating consumer protection laws and regulations regarding transparency and fair trading. This can lead to customer complaints, fines, and legal action, depending on local laws and regulations.
Overcoming Objections
Why would I use surcharging instead of baking the costs into my prices?
Using surcharging instead of baking credit card costs into your list price allows you to keep your list prices competitive. By adding a small surcharge for credit card payments, you stay ahead of competitors who might be hiking up their prices to cover fees, driving cash-paying customers your way. Plus, it lets you pass the processing fees only to those using credit cards, keeping list prices fair for everyone and protecting your bottom line.