Can Restaurants Charge Credit Card Fees? (2024)

FAQs

Can Restaurants Charge Credit Card Fees? ›

There is no prohibition for credit card surcharges and no statute on discounts for different payment methods. Sellers may impose a credit card surcharge of no more than 5 percent of the purchase price. Surcharges must be clearly posted and communicated before payment.

If you're wondering if it is legal to charge credit card fees, the short answer is yes. The practice of surcharging was outlawed for several decades until 2013 when a class action lawsuit permitted merchants in several U.S. states to implement surcharges in their businesses.

Answer: Credit card fees can add up as a significant expense. Couple that with rising food, labor and rent prices, and it is even harder to see margins in the restaurant business. Many operators add a surcharge to guests' bills if they pay with a credit card to offset the cost of the credit card fees.

Is It Legal to Pass Credit Card Fees to Customers? Surcharges and convenience fees on credit card transactions are legal on a federal level. But they are not legal in every state. There is a 4% maximum surcharge allowed at the federal level, which must be followed in all states where credit card surcharging is allowed.

By now, you might have experienced this practice in restaurants and retail stores, but there still lies confusion around the Surcharging rules and who enforces them. In the State of Wisconsin, it is legal to charge a surcharge to credit cards as long as the customer is notified in writing prior to checking out.

States that prohibit credit card surcharges and convenience fees. Ten states prohibit credit card surcharges and convenience fees: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

Credit card processing fees are paid by the vendor, not by the consumer. Businesses can pay credit card processing fees to the buyer's credit card issuer, to their credit card network and to the payment processor company. On average, credit card processing fees can range between 1.5% and 3.5%.

Restaurants have to abide by such disclosures and cannot quietly tack on a surcharge when you pay your bill. They also cannot just state on their menu that there will be a surcharge for customers paying with a credit card, without making the other required disclosures.

That can result in fines, and if the breach of contract continues or is serious enough the merchant risks losing the ability to accept those credit cards. The other restriction is because surcharging on debit card purchases is illegal under federal law.

When a store says you must spend at least $10 to use your credit card, that's not an arbitrary amount. According to a 2010 ruling under the Dodd-Frank law , a business is allowed to set a credit card minimum of up to $10, as long as that same standard applies to all the credit cards accepted by that merchant.

What is the difference between a surcharge and a convenience fee? ›

A surcharge is not a convenience fee. A convenience fee is levied by a merchant for offering customers the privilege of paying with an alternative non-standard payment method. Merchants can process convenience fees in all 50 states. A surcharge is levied by a merchant for customer purchases made with a credit card.

Credit card processing fees will typically cost a business 1.5% to 3.5% of each transaction's total. For a sale of $100, that means you could pay $1.50 to $3.50 in credit card fees.

Examples of Customer Notifications

For example, a point-of-entry disclosure could read as: “We impose a surcharge on credit cards that is not greater than our cost of acceptance.” In a point-of-sale scenario, your signage might display specific charges, such as: “We impose a surcharge of X% on the transaction.

Are credit card surcharges legal? Yes, except in some states with laws that prohibit credit card surcharges. Florida has a law prohibiting credit card surcharges, but that law was held unconstitutional by federal courts.

Credit card tax payments incur a fee from the payment processor. The fee varies by processor and is currently 1.85% to 3.93% of the payment with a $2.50 to $3.95 minimum, according to the IRS.

You may be able to pay a wide range of bills with a credit card, including utility, phone, cable, internet, streaming subscription, insurance, and medical bills. Keep in mind that some companies charge a convenience fee for paying with credit. You can check with billing departments to verify payment policies.

Texas law prohibits adding a surcharge for using a credit or debit card as payment. However, due to a recent federal lawsuit it is unclear when the Texas law against credit card surcharges can be enforced.

In fact, restaurant surcharges have been challenged in California state and federal courts and the courts found that restaurant surcharges are lawful.

Illinois House Bill 3128 (Prior Session Legislation)

Limits the surcharge to 1% of the transaction cost or the cost of processing the credit card transaction, whichever is less. Prohibits surcharges in connection with debit card transactions. Applies to in person, online, and telephone transactions.