Is It Legal to Charge a 3% Credit Card Fee?

In most US states, yes, you can add a fee when a client pays by credit card, but a flat 3% isn’t always a safe bet. Connecticut, Massachusetts, Maine, and Puerto Rico ban credit card surcharges, Oklahoma caps them at 2%, and New York and New Jersey limit them to what you actually pay to accept the card. Visa and Mastercard also cap the fee at your cost, and neither network allows a surcharge on a debit or prepaid card.

This guide is for MSPs, accounting firms, and other service businesses that invoice clients and want to pass card costs along without breaking a state law or a network rule. It covers where surcharges are banned or limited, how card types differ, what your invoices need to show, and what to do when clients are in other states.

The rules here are current as of October 2026, and they’re general information, not legal advice. Several states have continued to change their laws since 2023, so check the date and information on any guide you rely on.

What a credit card surcharge is and who sets the rules

A surcharge is an additional fee a merchant adds when customers pay by credit card instead of another method. Mastercard’s rules describe it as any fee that wouldn’t be charged if the customer paid some other way. Most businesses apply it as a percentage-based fee to offset processing fees, the amount your payment processor charges for each card payment. If you’ve never looked closely at that number, here’s how processor pricing is built.

Your surcharge has to clear three sets of rules: state law, the card brand rules from Visa, Mastercard, American Express, and Discover, and the merchant agreement behind your merchant account. For a business that invoices across state lines, state law can mean your state’s law, your client’s state law, or both.

However, federal law mostly stays out of it. Congress let the old federal ban on surcharges expire in 1984, as the Supreme Court noted in a 2017 case about New York’s law. What federal law does protect is your right to offer a discount for paying by cash or check.

Why 3% is the number that gets businesses in trouble

People search for 3% because it’s a common surcharge and it sounds like a legal maximum. Often it isn’t. Under Visa’s merchant Q&A, a surcharge can’t be more than 3% or your merchant discount rate, whichever is lower, and that rate is what you actually pay to accept the card. If your processor charges you 2.5% on a Visa credit card, 2.5% is the most you can add.

Mastercard uses the same idea with a 4% ceiling, so its cap is your average effective rate for Mastercard credit cards or 4%, whichever is lower. Several state credit card surcharge laws tie the fee to your cost too. New York says it can’t be more than what credit card companies charge you, and New Jersey caps it at your actual processing cost.

Here’s how that plays out on an invoice. Say you bill a client $4,000, and your effective rate on their card is 2.6%. Your card cost is $104, so a 3% surcharge of $120 would be $16 over your cost and over Visa’s limit.

Your effective rate also moves around. Interchange fees, which the card networks set and the card issuer collects, make up most of what you pay, and they’re usually higher on rewards cards. Check your monthly processing statement to see what you actually pay.

Where credit card surcharges are banned or limited

State law is where most of the variation exists. The table below shows the states and territories that ban surcharges, cap them, or add their own disclosure rules. If your state isn’t listed, we didn’t find a statewide ban or cap there as of October 2026, but the network caps and the debit card ban still apply. Rhode Island, for example, has no surcharge law, so only the card network limits and disclosure rules apply there. Bills pending in New Jersey and Massachusetts could change those two states’ rules, so it’s worth checking for new legislation at least once a year.

The four places with outright bans

Connecticut, Massachusetts, Maine, and Puerto Rico prohibit credit card surcharges. Connecticut’s law reaches sales to businesses as well as consumers, so it covers B2B invoices too. Maine’s regulator plainly states that sellers can’t add surcharges to credit or debit card payments.

For B2B sellers, Massachusetts and Maine are a little more difficult to understand because both bans exist in consumer credit codes that exclude credit extended for business purposes, and it isn’t settled whether that exception covers a client paying with a company card. If you have clients in any of these four places, the simplest choice is to leave the surcharge off their invoices.

States that cap the fee below 3%

Oklahoma used to ban surcharges, but since November 1, 2025, it has allowed them up to 2% or your actual cost, whichever is lower. You have to disclose the fee where clients enter and where they pay, which online means your home page and payment page. You also can’t surcharge at all if cards are the only payment you accept.

Colorado caps surcharges at 2% or the merchant's actual cost, subject to the applicable card-network limit, and its law actually spells out the wording your signage has to use. Minnesota allows up to 5%, which is above both network caps, so the Visa and Mastercard limits are what matter there.

Old bans that federal courts struck down

Surcharge bans still exist in California, Texas, and Florida, which is why articles list them as no-surcharge states, though the legal landscape remains unsettled in some states even after federal courts struck down parts of older surcharge bans. A federal appeals court struck down Florida’s ban in 2015, and another ruled in 2018 that California’s was unconstitutional as applied to the merchants who challenged it.

Texas is a murkier situation. In 2018, a federal court ruled its credit card ban unconstitutional as applied to the merchants who sued. Even so, the State Law Library notes that the attorney general says the ban still applies in some situations.

California's Honest Pricing Law (SB 478), in effect since July 1, 2024, requires advertised prices to include mandatory fees. The Attorney General’s guidance says a card fee customers can avoid by paying another way doesn’t count, unless you only accept cards.

Credit, debit, and prepaid cards follow different rules

Visa and Mastercard allow surcharges only on credit card transactions. You can’t add one to debit or prepaid card transactions, even when a client runs a debit card “as credit.” Visa points out that choosing credit only changes how the payment is authorized, and the client is still using a debit card.

You’ll often read that federal law bans surcharging debit card transactions, but that’s not where the ban comes from. The Durbin Amendment caps the interchange fees on many debit cards and protects your right to offer discounts, but it doesn’t mention surcharges. The networks set the ban, and Maine, Colorado, Texas, Louisiana, and Puerto Rico also bar debit card surcharges by law.

Because credit and debit cards can look identical at checkout, your payment platform has to recognize the card type before it adds any extra fee and automatically exclude debit and prepaid cards from any surcharge. In Alternative Payments, debit card fees are never passed to your client, even when credit card fee pass-through is turned on.

What about American Express and Discover?

American Express only allows a fee on its cards if you charge the same fee on other payment cards. Discover doesn’t publish its full rules the way Visa and Mastercard do, so ask your payment processor what applies before you add a fee to Discover payments.

Surcharges, convenience fees, and cash discounts are different things

These three get mixed up all the time, often because the customer’s payment method affects whether a charge is treated as a surcharge, a convenience fee, or a cash discount, and each one has its own rules. A surcharge is the percentage fee on a credit card payment that the 3% and 4% network caps apply to. Calling it a convenience fee or a cash discount doesn’t change how the card networks treat it.

Convenience fees

A convenience fee is a flat fee for paying through a channel outside your usual one, like paying by phone when you normally take payments in person. Visa requires it to be flat, disclosed before payment, and charged only for that alternative channel, and Mastercard has its own rules, including a separate program for government and education payments.

For a business that bills every client online, the payment page is the standard channel, so a convenience fee usually isn’t an option. Mastercard also doesn’t allow a surcharge and a convenience fee on the same transaction.

Cash discounts

A cash discount lowers your posted price for clients who pay by cash, check, or ACH. Federal law protects your right to offer one, and Connecticut and Massachusetts allow cash discounts even though they ban surcharges.

The catch is that it has to be a real discount from the price you show. If your invoice lists one price and a card fee appears at checkout, Visa can treat that as a surcharge, and Connecticut’s guidance does too, even if you call it a processing fee. A cash discount model works when the card price is the listed price and clients who pay by bank transfer see a lower total.

What your invoice and payment page need to show

If surcharging is allowed for a client, the network rules spell out how to do it. Compliant surcharging of credit card payments involves both card-brand rules and state-specific compliance requirements. Here’s the checklist we’d follow before you implement surcharges.

1. Tell your processor at least 30 days before you start. Visa requires notice to your acquirer, the bank that handles your card payments, and Mastercard requires notice to both your acquirer and Mastercard.
2. Disclose the surcharge before the client pays. Visa requires notice at the point of entry and the point of sale, in person and online, so your invoice or payment page should show the fee before the client enters a card number.
3. Put the fee on the receipt. Visa requires the surcharge fee to be listed as a separate line item, and Mastercard requires the dollar amount.
4. Keep the fee at or below your cost and the network cap. You can apply it to all of a brand’s credit cards or to specific card products, but Visa won’t let you do both.
5. Leave debit and prepaid cards out, even when a client chooses “credit” at checkout, including when a debit card is processed through a credit network.
6. Read your merchant agreement, since your processor can add requirements of its own.

State rules sit on top of the network rules. New York wants the total card price posted, Colorado has required sign wording, and Oklahoma wants the fee shown on your home page and payment page when you sell online. Online transactions also need the surcharge disclosed before purchase during checkout. When a state’s rule is stricter than the network rule, follow the state.

It also helps to notify customers before the first invoice with a fee goes out. A surcharge that shows up without warning can do more damage to customer relationships than the fee is worth, and undisclosed fees are exactly what disclosure requirements exist to prevent. Our guide on explaining billing changes to clients has a few ways to handle that conversation.

If you invoice clients in multiple states, check both states

This is the question most surcharge guides skip. Several state laws are written around sales that happen “in this state,” which is simple for a storefront and much less clear for an invoice paid from another state. If you’re in New Jersey and your client is in Connecticut, it isn’t settled whether New Jersey’s cost cap, Connecticut’s ban, or both apply. That means your client’s state may still be able to restrict your credit card surcharges, even when your own state allows them.

Until a court or regulator answers that, the cautious approach is to follow the stricter rule. That means leaving the surcharge off for clients in Connecticut, Massachusetts, Maine, and Puerto Rico, staying at or under 2% for clients in Oklahoma, and keeping the fee within your actual cost everywhere else.

The B2B question works the same way. Connecticut’s ban covers business sales, California’s surcharge laws apply only to consumer sales, and Colorado’s regulator reads its law as covering purchases with a consumer purpose. Most other state laws don’t draw that line, so assume they apply to business clients unless your attorney says otherwise.

Per-client settings make this manageable for surcharging compliance when you invoice clients in multiple states. In Alternative Payments, credit card fee pass-through starts out on for all of your clients, and Manage exceptions lets you switch it off for specific ones. Clients in states that ban surcharges never see the fee, and everyone else still does. The Managing Credit Card Fees help article shows where the setting lives.

What happens if you violate surcharge laws

Penalties depend on the state. Connecticut treats a surcharge as an unfair trade practice. Its consumer protection department can impose civil penalties after a hearing, and a court can order up to $5,000 for each willful violation under the state’s unfair trade practices law. New York allows up to $500 per violation, Minnesota allows up to $500 plus refunds to buyers, and Puerto Rico’s law includes fines and possible jail time.

Card network penalties work differently. Visa fines the acquiring bank that processes your payments rather than you directly, and your merchant agreement decides what happens after that.

There’s also a cost that doesn’t show up as a fine. Clients judge your business partly by how your invoices look and read, and one who finds an unexpected fee on a $6,000 invoice is going to ask about it. That conversation is much harder to have after the fact.

Should you add a surcharge at all?

Being allowed to surcharge doesn’t mean you have to. A client who has paid the same retainer for years may see a new card fee as nickel-and-diming, especially if it never came up when they signed, and some may cut back on credit card purchases when a fee is added.

You have three main options: surcharge, absorb the cost, or raise prices enough to cover it. The right choice depends on your margins, your clients’ preferences, and how much you spend on card acceptance. It’s the same choice MSPs face when vendor costs go up, and our article on whether to itemize a cost or fold it into your quote walks through how to decide. Whichever you choose, write down your surcharge policy so everyone who sends invoices applies it the same way.

Why many firms steer clients toward ACH instead

Many firms also nudge clients toward ACH, since bank payments don’t carry card fees. This matters especially for small businesses trying to reduce processing costs without upsetting clients, and clients are already moving that way. Nacha reported close to 8.1 billion B2B payments on the ACH Network in 2025, up almost 10% from the year before.

It’s cheaper for clients to send, too. The Association for Financial Professionals’ 2022 survey put the median cost of issuing a paper check at $2.01 to $4.00, versus $0.26 to $0.50 per ACH payment. For a side-by-side look, here’s what each way of getting paid really costs.

In Alternative Payments, clients can pay invoices by ACH or by card, so offering a no-surcharge option doesn’t mean changing how you bill. If you’d rather absorb card costs, you can turn pass-through off for every client at once, while still giving clients ACH as a lower-cost option than card use.

Frequently asked questions

Is it legal to charge a 3% credit card fee?

In most states, yes, if 3% isn’t more than your cost to accept the card and you follow the disclosure rules. It isn’t legal in Connecticut, Massachusetts, Maine, or Puerto Rico, and it’s over Oklahoma’s 2% cap. In Colorado, it only works under the merchant discount fee option when your fee is at least 3%. Debit and prepaid cards can’t be surcharged anywhere in the US.

Can I add a credit card surcharge to B2B invoices?

Usually, yes. Card network rules treat business and consumer payments the same way, and most state laws don’t separate them. If you bill clients in several states, check the rules where your clients are as well as where you are.

Do I have to notify Visa before I start surcharging?

Not directly. Visa’s current rules ask you to notify your acquirer at least 30 days ahead, and Mastercard wants notice sent to both your acquirer and Mastercard. Older guides sometimes still say to contact Visa.

Will the Visa and Mastercard settlement change the 3% limit?

It might. A federal judge gave the settlement preliminary approval on June 9, 2026, and the settlement website lists the final approval hearing for November 16, 2026. If it’s approved, Visa and Mastercard credit card surcharges would be capped at 3% or your cost of acceptance, whichever is lower, so Mastercard’s cap would drop from 4%. The agreement defines cost more narrowly than today’s rules do, so read the final terms before you change your fee.

See how card fee settings work in Alternative Payments

Whether you surcharge, absorb card costs, or steer clients toward ACH, your setup should match your client list and your surcharge policy. Automation can reduce administrative overhead, which gives your team more time to keep up with changing surcharge rules. Book a demo, and we’ll show you how fee pass-through and per-client exceptions work in Alternative Payments.

Sources

We checked these primary sources on October 20, 2026.

• Visa merchant surcharging Q&A (February 2024)
• Mastercard merchant surcharge rules
• Visa and Mastercard equitable relief settlement website and the settlement agreement
• Connecticut: Conn. Gen. Stat. § 42-133ff, Department of Consumer Protection surcharge FAQs
• Massachusetts: M.G.L. c. 140D, § 28A
• Maine: 9-A M.R.S. § 8-509 and Bureau of Consumer Credit Protection
• Puerto Rico: Law 150-2008 (government compilation)
• Oklahoma: SB 677, enrolled version (2025)
• Colorado: Administrator’s 2022 interpretive opinion on C.R.S. § 5-2-212
• New York: Governor’s announcement of the General Business Law § 518 amendment
• New Jersey: Division of Consumer Affairs surcharge FAQ
• Minnesota: Minn. Stat. § 325G.051
• Kansas: K.S.A. 16a-2-403
• California: Attorney General’s surcharge guidance and hidden fees guidance
• Texas: State Law Library surcharge FAQ
• Florida: Fla. Stat. § 501.0117
• Louisiana: Legislature’s digest of Act 751 (SB 254, 2026)
• Federal: 15 U.S.C. § 1666f and 15 U.S.C. § 1693o-2
• Nacha 2025 ACH Network results
• Association for Financial Professionals on payment costs

Talk with your legal or finance team before you start or change a surcharge program.

Reviewed by Daniel Reiter, Creative Director at Alternative Payments on October 20, 2026.