Credit Card Surcharge - A Detailed Guide

What is a credit card surcharge?
 
A surcharge is an additional fee charged by merchants on customers who use certain types of credit cards. The fee is typically a percentage of the total purchase price, and it is added to the bill at the time of purchase.
 
Surcharges are also sometimes called "checkout fees" or "convenience fees."
 
Why do merchants charge surcharges?
 
There are a few reasons why merchants might charge surcharges. First, merchant fees on credit card transactions are typically higher than those for other types of payments, such as cash or debit cards. So, by charging a surcharge, merchants can recoup some of those fees.
 
Second, some merchants may feel that credit card users are more likely to default on their payments than other customers, and so they charge a surcharge to offset that risk.
 
Finally, some businesses simply use surcharges as a way to discourage customers from using credit cards, opting instead for cash or debit cards.
 
Are surcharges legal?
 
In most cases, yes. In the United States, the major credit card networks (Visa, Mastercard, American Express, and Discover) all allow merchants to charge surcharges, as long as those charges are disclosed upfront and in a clear and conspicuous manner.
 
A handful of states have banned surcharges, however, including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. So if you live in one of those states, you won't be charged a surcharge on your credit card purchases.
 
What's the difference between a surcharge and a service fee?
 
A surcharge is an additional fee charged by the merchant on credit card purchases, while a service fee is a charge assessed by the credit card issuer.
 
Service fees are sometimes called "cash advance fees" or "balance transfer fees." They're typically a percentage of the transaction amount, and they're added to your bill when you make a purchase.
 
Credit card surcharges are added to the bill at the time of purchase, while service fees are assessed after the fact.
 
Do all merchants charge surcharges?
 
No. While many merchants do charge surcharges, it's not mandatory. And some businesses have policies against surcharging, even if it is legal in their state.
 
What's the best way to avoid paying surcharges?
 
The best way to avoid paying surcharges is to use a debit card, cash, or check. If you use a credit card, be sure to ask the merchant if they charge a surcharge before you make your purchase.
 
Bottom line
 
Surcharges are additional fees charged by merchants on customers who use certain types of credit cards. The fee is typically a percentage of the total purchase price, and it is added to the bill at the time of purchase. Surcharges are legal in most states, but a handful of states have banned them.