The CPA’s Guide to Credit Card Surcharging
The CPA’s Guide to Credit Card Surcharging
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The CPA’s Guide to Credit Card Surcharging Page 2 of 10
What CPAs Need to Know About Surcharging
CPAs 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 always looking for ways to manage your costs and operate more efficiently, so you’re likely looking for ways to offset the costs of processing each month.
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 you’re able to do so in your state.
Below, we’ll break down exactly what surcharging means, including its legal status in the U.S. and regulations in place around this practice.
Credit card surcharging rules
The legal status of surcharging in the U.S. (by state)
What is a surcharge?
The CPA’s Guide to Credit Card Surcharging Page 3 of 10
What is a surcharge?
In the context of credit cards, surcharging is defined as adding up to 4 percent 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. A convenience fee is a flat rate that can be added to both debit and credit card transactions. It’s a cost passed to the customer to give them the option of paying in a way that’s convenient to them, hence the name.
SURCHARGE
Up to 4% Flat rate
CONVENIENCE FEE
The CPA’s Guide to Credit Card Surcharging
The legal status of surcharging in the U.S. (by state)
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Surcharge Prohibited: Yes
Surcharge Prohibited: No
LEGEND
The CPA’s Guide to Credit Card Surcharging
The legal status of surcharging in the U.S. (by state)
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Alabama Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Alabama Attorney General
Alaska Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: State of Alaska Department of Law
Arizona Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Arizona Attorney General
Arkansas Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Arkansas Attorney General
California Surcharge Prohibited: NoCredit/Debit Usage Discounts: YesResources: California Attorney General
Colorado Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Colorado Attorney General
Connecticut Surcharge Prohibited: YesCredit/Debit Usage Discounts: Yes Resources: Conn. Gen. Stat. §42-133ff
Delaware Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Delaware Attorney General
Florida Surcharge Prohibited: No Credit/Debit Usage Discounts: NoResources: Florida Attorney General
Georgia Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Georgia Attorney General
Hawaii Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Hawaii Attorney General
Idaho Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Idaho Attorney General
Illinois Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Illinois Attorney General
Indiana Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Indiana Attorney General
Iowa Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Iowa Attorney General
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The CPA’s Guide to Credit Card Surcharging
The CPA’s Guide to Credit Card Surcharging
The legal status of surcharging in the U.S. (by state)
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Kansas Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Kansas Attorney General
Kentucky Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Kentucky Attorney General
Louisiana Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Louisiana Attorney General
Maine Surcharge Prohibited: No Credit/Debit Usage Discounts: NoResources: Maine Attorney General
Maryland Surcharge Prohibited: NoCredit/Debit Usage Discounts: YesResources: Maryland Attorney General
Massachusetts Surcharge Prohibited: YesCredit/Debit Usage Discounts: YesResources: Massachusetts Attorney General
Michigan Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Michigan Attorney General
Minnesota Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Minnesota Attorney General
Mississippi Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Mississippi Attorney General
Missouri Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Missouri Attorney General
Montana Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Montana Attorney General
Nebraska Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Nebraska Attorney General
Nevada Surcharge Prohibited: NoCredit/Debit Usage Discounts: YesResources: Nevada Attorney General
New Hampshire Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: New Hampshire Attorney General
New Jersey Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: New Jersey Attorney General
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The CPA’s Guide to Credit Card Surcharging
The legal status of surcharging in the U.S. (by state)
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New Mexico Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: New Mexico Attorney General
New York Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: New York Attorney General
North Carolina Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: North Carolina Attorney General
North Dakota Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: North Dakota Attorney General
Ohio Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Ohio Attorney General
Oklahoma Surcharge Prohibited: NoCredit/Debit Usage Discounts: YesResources: Oklahoma Attorney General
Oregon Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Oregon Attorney General
Pennsylvania Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Pennsylvania Attorney General
Rhode Island Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Rhode Island Attorney General
South Carolina Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: South Carolina Attorney General
South Dakota Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: South Dakota Attorney General
Tennessee Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Tennessee Attorney General
Texas Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Texas Attorney General
Utah Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Utah Attorney General
Vermont Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Vermont Attorney General
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The CPA’s Guide to Credit Card Surcharging
The legal status of surcharging in the U.S. (by state)
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Virginia Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: Virginia Attorney General
Washington Surcharge Prohibited: NoCredit/Debit Usage Discounts: YesResources: Washington Attorney General
West Virginia Surcharge Prohibited: NoCredit/Debit Usage Discounts: NoResources: West Virginia Attorney General
Wisconsin Surcharge Prohibited: NoCredit/Debit Usage Discounts: YesResources: Wisconsin Attorney General
Wyoming Surcharge Prohibited: NoCredit/Debit Usage Discounts: YesResources: Wyoming Attorney General
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Surcharging rules
Almost every major card brand requires you to notify them of your intention to surcharge. Most brands have a form to fill out on their website. Otherwise, you must provide a written letter to your account representative. More importantly, once notified, you must wait no less than 30 days before you start implementing surcharging.
Notify the card brand of your intent to surcharge
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:
Surcharges must be listed as separate line items
You cannot simply loop your surcharges into each transaction. When a surcharge occurs, it must be listed separately on each invoice. Itemizing your invoice also helps you avoid charge disputes. It’s important to note that you cannot implement a surcharge on debit cards.
Do not surcharge more than the cost of your processing fee
This rule essentially means that you can only surcharge to recoup the losses sustained from processing fees—you cannot use surcharging as a means to profit. If, for example, your all-in rate is only three percent, you cannot apply a 4 percent surcharge.
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 states your intentions to do so. Fortunately, if you’re using the right online payment solution, this step can be skipped altogether, as they will handle it on your behalf.
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 accepting credit cards.
To learn more about CPACharge, an online payment solution specifically designed for CPAs and CPA firms, schedule a demo of our solution. Or, if you’re ready to start getting paid faster, sign up today!
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CPACharge is a registered agent of Wells Fargo Bank N.A., Concord, CA, Synovus Bank, Columbus, GA., and Fifth Third Bank, N.A., Cincinnati, OH.
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