Credit Card Surcharging Laws in 2026: Surcharge vs Cash Discount, State by State

TL;DR

Surcharging is banned in Connecticut, Maine, Massachusetts, and Puerto Rico. California added restrictions in July 2024 without an outright ban. Oklahoma and Kansas lifted their bans in 2025. Everywhere else, surcharging credit cards is legal under Visa (3% cap) and Mastercard's effective 3% cap. Cash discount programs are legal everywhere except Puerto Rico. Knowing which program you're actually running matters more than what your processor calls it.

Your processor sold you a "zero-fee processing program." You said yes. Three months later, the Connecticut Department of Consumer Protection sends a letter.

This is not hypothetical. Credit card surcharging laws in Connecticut were updated in 2024 (Public Act 24-142) to prohibit labels like "non-cash adjustment," "processing fee," and "transaction fee" — labels processors had been using to disguise surcharges. The law does not care what the receipt line item says. It cares whether the customer paid more than the posted price when using a card.

That's the test. Four jurisdictions use it. If you're considering a surcharge or cash discount program, or wondering whether what you're already running is legal, here's the full picture. (If you're still getting up to speed on how payment processing works, start there first.)

What's the actual difference between a surcharge and a cash discount?

A surcharge adds a fee on top of your posted cash price at checkout. A cash discount reduces from your posted card price at checkout. The legal distinction is entirely about direction: if the customer pays more than the price you advertised, it's a surcharge regardless of the label. If they pay less, it's a discount.

In a surcharge program, you advertise the cash price. Customers paying by credit card pay more. The fee is added at checkout.

In a cash discount program, you advertise the card price, with processing costs built in. Cash and check customers get a reduction.

Both programs create the same spread between what a cash customer pays and what a card customer pays. The legal test is direction of movement from the posted price, full stop.

The federal definition comes from the Durbin Amendment (15 U.S.C. § 1693o-2): a "discount" is "a reduction made from the price that customers are informed is the regular price." If the customer pays more than the posted price, it's a surcharge. If less, it's a discount. State laws that ban surcharging use the same mechanical test.

The label on the receipt is legally irrelevant. We've onboarded merchants in Connecticut, Maine, and California who were already running what their processor called a cash discount program. In every case where the shelf price was the cash price with a fee added at checkout, the program was a surcharge by another name. State regulators look at the mechanics, not the marketing.

Which states ban credit card surcharging?

As of May 2026, credit card surcharging is banned outright in Connecticut, Massachusetts, Maine, and Puerto Rico. Three of these allow cash discounts. Puerto Rico prohibits both surcharges and cash discounts, as confirmed by the First Circuit on May 29, 2025 (ABA Banking Journal, July 2025, Case No. 24-1188), upholding Laws of Puerto Rico, Title 10 § 11 against a federal preemption challenge.

Connecticut — Conn. Gen. Stat. § 42-133ff, amended by Public Act 24-142. Surcharges are banned. The 2024 amendment specifically added "non-cash adjustment," "processing fee," and "transaction fee" to the list of prohibited labels, closing the loophole processors had been using. Cash discounts are permitted. Enforcement is under the Connecticut Unfair Trade Practices Act (CUTPA): injunctive relief, restitution, civil penalties, and private lawsuits with punitive damages and attorney's fees.

Massachusetts — Mass. Gen. Laws ch. 140D, § 28A. The text: "No seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means." Cash discounts are expressly permitted by the same statute.

Maine — Me. Rev. Stat. tit. 9-A, § 8-509. Surcharges are prohibited for both credit and debit cards on private merchant transactions. Government entities may surcharge up to actual processing cost. Cash discounts are allowed. A repeal bill (LD 151) was killed in committee in May 2025. The ban stays.

Puerto Rico — Laws of Puerto Rico, Title 10 § 11 (Law 150-2008, amended by Law 152-2013). Both surcharges and cash discounts are prohibited. Law 152 repealed the cash discount exception from Law 150. The First Circuit upheld this on May 29, 2025, rejecting a federal preemption challenge. Neither program is available in Puerto Rico.

What does California actually say?

California is not a surcharge ban state. SB 478 (Cal. Civil Code § 1770(a)(29)), effective July 1, 2024, is a drip-pricing law: it prohibits advertising a price and then adding mandatory fees the customer cannot avoid. The California AG confirmed in May 2024 FAQs that an avoidable credit card surcharge is not a prohibited mandatory fee. If a customer can pay cash, check, or debit, the surcharge is optional and does not need to appear in the advertised price.

California shows up on nearly every "banned states" list. It should not be there. That said, the compliance picture is more complicated than most guides admit.

The restriction hits e-commerce. If your online store accepts only credit cards, the surcharge is mandatory. Every customer pays it. Under SB 478, that means it must be included in the advertised price, not revealed at checkout. Violations carry fines of up to $1,000 per occurrence under the California Consumer Legal Remedies Act, plus class action exposure.

In-person merchants who accept cash can still surcharge in California with proper disclosure. Online merchants accepting only cards cannot add a hidden surcharge. For most California merchants, the safer structure is a cash discount program: post the card price, discount for cash. That approach is fully compatible with SB 478.

What changed in 2025?

Oklahoma and Kansas both lifted their surcharge bans in 2025. Oklahoma (SB 677, effective November 1, 2025) allows surcharging up to the lesser of 2% or actual processing cost; that 2% cap is stricter than Visa's 3% network cap, so state law controls. Kansas (HB 2247, effective January 1, 2025) lifted its ban with no fixed percentage cap beyond actual processing cost. Minnesota and Virginia tightened disclosure requirements without banning surcharging.

Oklahoma — ban repealed, effective November 1, 2025

Oklahoma Senate Bill 677 repealed the prohibition in Okla. Stat. tit. 14A, § 2-417. Surcharging is now permitted, with three conditions:

• Cap of the lesser of 2% or actual processing cost. Oklahoma's 2% cap is stricter than Visa's 3%; state law controls when it is more restrictive.
• Clear and conspicuous disclosure at point of entry for physical stores, before checkout online, and verbally for phone orders.
• No surcharging debit cards.

Kansas — ban lifted, effective January 1, 2025

Kansas House Bill 2247 repealed the Kansas prohibition. Merchants may surcharge up to actual processing cost with required disclosure. Visa and Mastercard network caps (3% effective for dual-acceptance merchants) govern the ceiling.

Minnesota — surcharge must appear in advertised price, effective January 1, 2025

Minnesota's amendment to Minn. Stat. § 325G.051 does not ban surcharging. It requires any surcharge to be included in prices posted on menus, websites, and advertisements before the checkout step.

A sign at the register saying "3% surcharge applies" no longer complies. The menu price must already reflect the card price. If a burger is $12.00 and your surcharge is 3%, the menu shows $12.36. The cash customer gets a discount down to $12.00 at checkout. For restaurants with printed menus, that means a reprint every time prices change. Most Minnesota merchants find it simpler to structure as a cash discount — post the card-inclusive price, discount for cash — and sidestep the reprint burden entirely.

Virginia — conspicuous disclosure required, effective July 1, 2025

Virginia SB 1212 requires merchants to display total prices that include all mandatory fees. Penalties are $2,500 per violation, $5,000 for subsequent violations, with a private right of action for actual damages or $500, whichever is greater.

The practical implication is the same as Minnesota: the surcharge cannot live only at the register. A salon in Richmond that charges $85 for a cut and adds a 3% card surcharge needs to show $87.55 on its website, booking software, and any posted price list. Customers who see "$85" advertised and get charged $87.55 at checkout have a private right of action. The $500 minimum recovery makes small merchants a viable target for demand letters.

New York — post the highest total price, effective February 11, 2024

New York GBL § 518 requires posting the highest price a customer could pay, inclusive of any surcharge. Cap is actual processing cost.

What are Visa and Mastercard's network rules?

Visa caps surcharges at 3% or actual cost of acceptance, whichever is lower (Visa U.S. Merchant Surcharge Q&A, visa.com). Mastercard caps at 4%, but if you accept both networks, the effective cap is 3% — you cannot charge Mastercard customers more than Visa customers. Debit card surcharges are federally prohibited under the Durbin Amendment (15 U.S.C. § 1693o-2, Dodd-Frank 2010), regardless of state. Written acquirer notification is required 30 days before surcharging begins.

Network rules apply on top of state law, not instead of it. When state law is more restrictive — Oklahoma's 2% cap versus Visa's 3%, for example — state law controls.

Debit cards. There is no exception here. The Durbin Amendment covers both PIN debit and signature debit. No state permission overrides the federal prohibition.

Registration. Written notice to your acquiring bank at least 30 days before surcharging begins. As of April 15, 2023, direct Visa notification is no longer required. Your acquirer handles downstream registration. Mastercard still requires direct written merchant notification.

Required disclosures. Signage at point of entry, at point of sale, and the surcharge as a separate line item on every receipt. Online: full disclosure before payment is submitted, not after.

Can I run a cash discount program where surcharging is banned?

Yes, in Connecticut, Massachusetts, and Maine. All three states prohibit surcharging but explicitly permit discounts for non-card payment. A properly structured cash discount program, where the posted price is the card price and cash customers pay less, does not violate the surcharge ban in any of these states. Puerto Rico is the one exception: both surcharges and cash discounts are prohibited there, as confirmed by the First Circuit on May 29, 2025.

The three ban states draw the same line: adding a fee on top of the posted price is a surcharge; reducing from the posted price is a discount. As long as your program is the second structure, you're legal in CT, MA, and ME.

Puerto Rico does not draw that line. Both structures are prohibited.

What a compliant cash discount program looks like:

1. Shelf, menu, and advertised prices reflect the card price (processing cost built in).
2. Signage at point of entry informs customers that cash payment receives a discount.
3. Cash customers see the discount applied at checkout.
4. The receipt shows the card price and the discount as a separate line item.
5. The cash customer pays less than the posted price.

What a non-compliant program looks like:

1. Shelf prices reflect the cash price.
2. A "non-cash adjustment" or "cash discount fee" is added at checkout for card payment.
3. The card customer pays more than the shelf price.

That second structure is a surcharge. Connecticut's 2024 amendment was written specifically to stop processors from relabeling it. If you're not sure which structure your program uses, the test is simple: what price is on the shelf? If it's the cash price, you're surcharging.

Which program is better for your business?

Cash discount programs work better for food service, high-volume low-ticket retail, and any merchant operating in a ban state. Surcharge programs work better for contractors, professional services, and B2B merchants billing large invoices where a 3% fee is proportionally significant and customers expect it. Neither program lowers your underlying processing costs — both shift who pays them.

Surcharge programs fit when:

• You bill large invoices to business customers. A 3% surcharge on a $15,000 contractor invoice is $450. B2B customers see it as a transparent line item and accept it.
• You're in professional services. Attorney, CPA, and consultant billing platforms handle surcharge compliance natively.
• Transaction size is large enough that the surcharge is meaningful to your margins.

Cash discount programs fit when:

• You're in food service. "Save $0.45 on your $15 check if you pay cash" lands better than "we're adding a fee." Discount framing holds up with repeat customers.
• You have real cash volume. If 25% of customers already pay cash, a cash discount moves them to a lower total without charging anyone more than the posted price.
• You operate in Connecticut, Massachusetts, or Maine. Cash discount is the only legal path to differential pricing.
• You have California e-commerce exposure. Posting the card price and discounting for alternative payment is the cleanest SB 478 compliance path.

Neither program fixes a rate problem. If your effective processing rate is already higher than it should be before you add a surcharge or cash discount, the program does not change that. It just changes who writes the check. Understanding your actual interchange costs and what your statement actually says is the foundation.

What do you need to do before going live?

Before implementing a surcharge or cash discount program: confirm your state permits the structure you're using, get the program type confirmed in writing from your processor, give your acquiring bank 30 days written notice, update signage at every customer touchpoint, and verify your terminal excludes debit transactions from any surcharge. That last step is not optional — one debit surcharge is a federal violation.

1. Confirm your state's rules. Connecticut, Massachusetts, Maine, and Puerto Rico ban surcharging. Puerto Rico also bans cash discounts. Oklahoma (November 1, 2025) and Kansas (January 1, 2025) now allow surcharging with caps. Minnesota and Virginia require surcharges to appear in advertised prices before checkout.

2. Confirm your program structure in writing. Ask your processor: is the posted price the cash price or the card price? Cash price means surcharge. Card price means cash discount. Get the answer in writing.

3. Give your acquirer 30 days written notice. Do not start surcharging before that window closes. Get written acknowledgment from your processor.

4. Update all signage. Point of entry, point of sale, online pre-checkout, and receipts. Minnesota and Virginia require surcharges to appear in advertised prices, not just at the register.

5. Verify debit exclusion is programmed. Your terminal must identify debit cards and apply zero surcharge. Confirm this with your processor before going live.

If you want to know whether your current setup even warrants adding one of these programs, a statement review is the right starting point. Talk to us about your processing costs and we'll look at your actual effective rate before recommending anything.

Frequently Asked Questions

Is credit card surcharging legal in all 50 states?

No. Surcharging is prohibited in Connecticut (Conn. Gen. Stat. § 42-133ff), Massachusetts (Mass. Gen. Laws ch. 140D, § 28A), and Maine (Me. Rev. Stat. tit. 9-A, § 8-509). Puerto Rico prohibits both surcharges and cash discounts under Laws of Puerto Rico, Title 10 § 11. California restricts surcharges for online merchants through its July 2024 drip-pricing law, SB 478 (Cal. Civil Code § 1770(a)(29)). Everywhere else, credit card surcharging is permitted under Visa and Mastercard network rules.

What is the maximum surcharge I can charge in 2026?

Visa caps surcharges at 3% or actual cost of acceptance, whichever is lower. Mastercard caps at 4%, but if you accept both networks, the effective cap is 3% — you cannot charge Mastercard customers more than Visa customers. Oklahoma caps at 2% regardless of network rules. Apply the most restrictive rule for your state and card type.

Can I surcharge debit cards?

No. The Durbin Amendment (15 U.S.C. § 1693o-2), enacted as part of Dodd-Frank in 2010, federally prohibits surcharging debit transactions. This applies to both PIN debit and signature debit. Your terminal must be configured to exclude debit cards from any surcharge program before you go live.

What's the legal difference between a cash discount and a surcharge?

The test: does the customer pay more than the posted price, or less? Surcharge program: posted price is the cash price, card customers pay more. Cash discount program: posted price is the card price, cash customers pay less. State regulators apply this mechanical test regardless of what the receipt line item says. Connecticut's 2024 amendment specifically prohibits labeling a surcharge a "non-cash adjustment."

Are cash discount programs legal where surcharging is banned?

Yes, in Connecticut, Massachusetts, and Maine. All three explicitly permit discounts for non-card payment. Puerto Rico is the exception: both programs are prohibited, as confirmed by the First Circuit's May 29, 2025 ruling upholding Law 152-2013 (ABA Banking Journal, July 2025, Case No. 24-1188).

Do I need to register with Visa before surcharging?

You no longer notify Visa directly. As of April 15, 2023, you notify your acquiring bank in writing at least 30 days before surcharging begins. Your acquirer handles downstream Visa registration. Mastercard still requires direct written merchant notification. Get written confirmation from your processor that both are complete before your first surcharged transaction.

Disclaimer

This post reflects publicly available regulatory and card network information as of May 2026. Laws change. Connecticut, Maine, Massachusetts, and Puerto Rico prohibit credit card surcharging; Puerto Rico also prohibits cash discounts. California's rules depend on your business model. Oklahoma and Kansas lifted surcharge bans in 2025 with specific disclosure requirements. Nothing in this post constitutes legal advice. Consult a licensed attorney before implementing any surcharge or cash discount program, particularly if you operate in Connecticut, Maine, Massachusetts, California, or Puerto Rico.

Kaleb Dickhaut — Founder, ClickWerxs. Kaleb works directly with merchants to identify and eliminate unnecessary payment processing costs.
linkedin.com/in/kaleb-dickhaut

Sources

1. Federal Reserve Board, Regulation II debit card interchange fee standard — covered issuers may not receive more than $0.21 plus 0.05% of transaction value, plus a $0.01 fraud-prevention adjustment where eligible. federalreserve.gov
2. Processing rates, fee ranges and effective-rate figures in this post are industry-typical ranges compiled from published network schedules and from accounts reviewed in the ClickWerxs ISO portfolio. They are not quoted rates. Interchange itself is set by Visa and Mastercard on published schedules that change twice yearly; your actual cost depends on card mix, MCC, ticket size and volume.
3. ClickWerxs ISO portfolio, aggregate observation — patterns described from merchant accounts under ClickWerxs management. Anonymized and reported in aggregate; individual account terms vary. Operator data.

ClickWerxs facilitates merchant account applications and provides ongoing account management as an authorized representative of our banking and processing partners. Approval, rates, and terms are determined by the issuing processor and acquiring bank — ClickWerxs does not guarantee approval for any merchant account application. Processing rates and fee structures cited in this post reflect publicly available industry data and general ranges; your actual rate depends on your industry, volume, and card mix. This post is not legal or financial advice. For a custom quote, see clickwerxs.com/payments/get-a-quote.