Billing and Payments

Credit Card Surcharge Processing: What CPAs and Accountants Need to Know

CPACharge Team
December 8, 2023

CPAs and accountants are all too familiar with the fact that it costs money to move money within our financial systems. Credit cards are no exception to this rule—if you accept credit card payments from your clients, you'll inevitably have to pay processing fees with each transaction. Of course, as a business owner, you're also looking for ways to offset your costs and operate more efficiently.

Many businesses that accept credit cards use surcharges to account for this, but you may be wondering how to effectively implement one into your billing, or if it's even legal for you to do so in your state.

Below, we’ll break down exactly what surcharging means, including its legal status under each state’s law and what you can do to implement them.


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What is a surcharge?

In the context of credit cards, surcharging is defined as adding a percentage-based fee (generally up to 3%) on credit card transactions to recoup payment processing costs. The practice became permissible to merchants in 2013 in the wake of a class action lawsuit against Visa and MasterCard.

It’s important to note that a surcharge is distinct from a convenience fee, which is a relatively older but similar term in the credit card lexicon.

Surcharging has been outlawed as an anti-consumer practice in three states (Connecticut, Massachusetts, and Maine) and Puerto Rico. However, these laws were challenged in such states as New York and California, and other states have indicated they may be unenforceable.

Note: Surcharges are governed by both state law and card brand rules (like those published by Visa and Mastercard), each of which are subject to change. The following list, updated as of December 2023, provides CPAs with updated information on the legal status of credit card surcharges specifically based on state law.

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Credit card surcharging rules

If you choose to surcharge, you’re required to follow rules put in place by each credit card brand. We’ll discuss the most common rules below:

Note: this is not a complete list.

Notify the card brand of your intent to surcharge

Almost every major card brand requires you to notify them of your intention to surcharge. Most brands have a form you can fill out available on their website. Otherwise, you must provide a written letter to your account representative.

Notify your clients of your intention to surcharge

You are also required to notify your customers or clients of your intention to surcharge (as soon as you are eligible to do so). For example, if using an online payments solution, you would have to include language on your payment page that clearly identifies the credit card surcharge before payment is submitted.

Do not surcharge more than the cost of your processing fee

This rule essentially means that you cannot use surcharging as a means to profit. In general, brand rules limit surcharges to 3 percent in the U.S.

Surcharges must be listed as separate line items

You cannot simply lump your surcharges into each transaction total. Whenever a surcharge occurs, it must be listed separately on each invoice or payment confirmation page.

Payment processing may be one of the costs of doing business in today’s economy. However, your clients will appreciate being able to pay with a more convenient payment option, which increases the speed and the frequency that you’ll get paid for your services. And with surcharging, you can benefit from the efficiency and popularity of online payment solutions while still offsetting the fees associated with credit cards.