It’s okay to ask—almost everyone wants to know the answer. Because we know processing or credit card fees eat into your profit, and even though these fees are a part of doing business online, it’s fair to want to figure out a way around them. So, we’re going to cut straight to the chase and break down the answer—because the answer is “yes” depending on where you live.
What states don’t allow you to pass along processing or credit card fees?
At the time we are writing this (May of 2023), there are 2 states and 1 U.S. territory that don’t let you pass along processing or credit card fees. Those states are Connecticut and Massachusetts. The territory is Puerto Rico. And the reason is that these places do not allow surcharging.
Pro-tip: Run your business in one of these states but still want to use online invoicing and payments? Rock Paper Coin allows you to accept payment via ACH transfer!
What is surcharging?
Surcharging is when a business charges a cardholder more for using a credit or debit card than if they had paid with cash. This means, that if you live in one of the states mentioned above, you cannot pass along the processing or credit card fees to your customers. If you do pass them along, it’s considered surcharging, and you may face penalties.
Pro-tip: Having a discount for paying with cash is not the same as surcharging.
Is a convenience fee the same as a surcharge?
Nope—and this explanation from Nerdwallet makes it easy to understand:
A convenience fee is a fee that a merchant charges a customer for paying in a manner that’s not standard for the business (for example, by mail or over the phone with a credit card). A convenience fee is technically different from other charges a business owner could impose, such as a service fee or surcharge.
What states allow you to pass along processing or credit card fees?
Fortunately, most of the U.S. states do allow you to pass along processing or credit card fees. You can look up each state’s laws and regulations regarding this topic; however, here are some general rules that apply in those states:
- Processing fees must be reasonable and necessary for the transaction
- The fee must be disclosed clearly and conspicuously to the customer
- You must provide an alternate payment form (cash or check) for customers who are unwilling or unable to pay the fee
You can also consider rolling the processing or credit card fee into the price of your service.
The bottom line? You can pass along processing or credit card fees to your clients—but only if you’re in one of the states that allow it. So, it’s a good idea to double (or triple check) your state’s laws and regulations to ensure you are compliant. And if you live in one of the states that doesn’t allow it, make sure you have an alternate form of payment available for customers who are unwilling or unable to pay the fee.