More businesses than ever are passing card costs on to customers, and a whole industry has grown up selling programs to do it. They go by many names: surcharging, cash discount, dual pricing, non-cash adjustment, service fee. The name on the program doesn't decide which rules apply to you. What your customer sees and pays decides it.
This guide covers:
- the difference between the two programs;
- the card network rules for each;
- how state laws change the picture;
- five questions to ask about a program you're already running.
This is general information, not legal advice. Surcharging rules vary by state and are changing. Confirm your own situation with your processor and, where needed, a lawyer.
Key takeaways
- A surcharge adds a fee to the posted price when a customer pays by credit card. A cash discount lowers the posted card price when a customer pays cash.
- The test is which price is posted. If the posted price is the cash price and a fee is added for cards, the card networks treat it as a surcharge, whatever the program is called.
- Surcharges are capped by the card networks (Visa 3%, Mastercard 4%, and never more than your cost of acceptance), banned or limited in some states, and not allowed on debit or prepaid cards anywhere.
- Cash discounts are protected by federal law and aren't capped by the networks, but the discount has to be real.
- The proposed Visa–Mastercard settlement would simplify credit card surcharging. It isn't final, and today's rules still apply.
The difference in one example
Say an item costs $100.
- Surcharge: the shelf price is $100. A customer paying by credit card pays $100 plus a 3% surcharge, $103. A customer paying cash pays $100.
- Cash discount: the shelf price is $103, which is the card price. A customer paying cash gets a discount and pays $100. A customer paying by card pays the posted $103.
The totals are identical. The difference is which price is posted, and therefore whether the customer is being charged more for using a card or charged less for using cash. Card networks and state laws treat those two things very differently.
How to tell which program you're actually running
Look at three things:
- The posted price. Is the price on your shelf, menu, website or quote the card price or the cash price?
- The receipt. Does a card customer's receipt show an added line, labeled surcharge, service fee, non-cash adjustment or similar, on top of the posted price? Or does a cash customer's receipt show a discount off the posted price?
- Debit cards. Does a customer paying by debit card pay more than the posted price?
If the posted price is the cash price and card customers get an added line, you're running a surcharge program, even if it's sold as "cash discount" or "dual pricing." Visa told acquirers in a 2018 bulletin that programs which add a fee and then remove it for cash payers are not compliant cash discount programs under its rules (PaymentsJournal).
This matters because a program that's really a surcharge has to follow surcharge rules, including the ban on surcharging debit cards. Many "non-cash adjustment" programs charge the fee to debit customers too.
Surcharge rules: the card networks
Visa's U.S. surcharging requirements (Visa merchant surcharging requirements) include:
- A cap of 3% of the transaction, and never more than your cost of accepting credit cards. Visa lowered its cap from 4% to 3% in April 2023 (ArentFox Schiff).
- Credit cards only. Debit and prepaid cards can't be surcharged, even when a debit card is run as credit.
- Notice to your processor at least 30 days before you start.
- Disclosure at the point of entry (your door or website) and at the point of sale.
- The surcharge shown as its own line on the receipt, in dollars.
Mastercard's U.S. Merchant Surcharge Rules cap the surcharge at 4% and at the cost of acceptance. Review the current Mastercard rules and confirm implementation requirements with your processor.
What the pending settlement would change
The proposed Visa–Mastercard settlement, preliminarily approved in June 2026, would adopt a simplified approach to credit card surcharging with a 3% cap for both networks (Arnall Golden Gregory). It isn't final. Until final approval and new network rules, the current rules apply. More in our article on the Visa–Mastercard settlement.
Surcharge rules: state laws
State rules vary, change, and may be stricter than network rules. Before starting or changing a program, check the relevant state's official statute, regulations, or regulator guidance and confirm requirements with your processor. For example, Colorado's enacted statute describes a limit of 2% of the transaction total or the merchant discount fee; see the Colorado legislature's SB 21-091 page. This is not a state-by-state legal survey.
Cash discount rules
Federal law protects a merchant's right to offer a discount for paying with cash. The Durbin Amendment to the Dodd-Frank Act bars card networks from preventing it. Cash discounts aren't capped by the networks the way surcharges are. But a program only counts as a cash discount if it really works like one:
- The posted price is the card price, or both prices are clearly posted ("dual pricing").
- The cash customer gets a real discount off that posted price at the register.
- Card customers are never charged more than the posted price, with no added fee line at checkout.
State rules also vary on how cash discounts are presented. Check the relevant state's official source before relying on a program.
One practical note: under a true cash discount, debit customers pay the posted card price like any other card customer. That's allowed, because nobody is being surcharged. The posted price simply isn't discounted for them.
Which is right for your business?
| Surcharge | Cash discount | |
|---|---|---|
| Posted price | Cash price; card fee added | Card price; cash customers get a discount |
| Network cap | Yes (Visa 3%, Mastercard 4%, never above your cost) | No network cap |
| Debit cards | Can't be surcharged | Pay the posted price |
| State restrictions | Banned in some states, capped in others | Fewer restrictions, but some states regulate disclosure |
| Customer perception | A visible fee at checkout | Higher posted prices, a reward for cash |
| Paperwork | Advance notice to your processor, signage, receipt line | Clear posting of prices, and the discount shown at the register |
Neither program lowers what accepting cards actually costs you. Each passes some of that cost to customers. Both depend on knowing that cost accurately. A surcharge that exceeds your cost of acceptance breaks network rules, and you can't know your cost without reading your statement.
Five questions to ask about the program you already have
- What price is posted: cash or card?
- What does a card customer's receipt show? Is there a separate line added on top of the posted price?
- Do debit customers pay more than the posted price? If your program is a surcharge, they shouldn't.
- Does the surcharge percentage exceed your cost of acceptance? Work out your effective rate (total fees ÷ total card sales) for the cards you surcharge, and compare.
- What does your state allow? Check it yourself rather than relying on whoever sold you the program.
If any answer surprises you, raise it with your processor in writing.
How Statement Forensics can help
A Statement Forensics audit reads your statement independently. It shows what accepting cards actually costs you, line by line, so you can see how a surcharge or discount compares with your real cost. Where a statement shows a surcharge or cash discount program, the report sets out the arithmetic and gives you the questions to put to your processor. We don't give legal opinions on whether a program complies; that's for your processor and, if needed, your lawyer. What we provide is the numbers those conversations need.
We don't sell processing, have no processor or ISO affiliation, and take no residuals or referral fees. Statements sent for an audit are used to produce the reports and deleted when they're delivered. US statements only.
Email a recent statement to audit@statementforensics.com.
Frequently asked questions
What is the difference between a surcharge and a cash discount?
A surcharge adds a fee to the posted price when a customer pays by credit card. A cash discount reduces the posted card price when a customer pays cash. The totals can be the same, but the rules differ. Surcharges are capped by the card networks, banned in some states and not allowed on debit cards. Cash discounts are protected by federal law and aren't capped by the networks.
Is it legal to charge customers a credit card fee?
Network rules allow surcharges on credit cards within their caps and cost-of-acceptance limits, with notice and disclosure requirements; debit and prepaid cards cannot be surcharged. State rules vary and may be stricter. Check the relevant state's official statute or regulator and confirm the requirements with your processor.
Can I add a surcharge to debit card transactions?
No. Card network rules prohibit surcharging debit and prepaid cards in every state, even when a debit card is processed as credit. If your terminal adds a fee to debit transactions, ask your processor about it.
Is a "non-cash adjustment" the same as a cash discount?
Not necessarily. If your posted prices are cash prices and a fee is added at checkout for card payments, Visa treats that as a surcharge, whatever the program is called. A true cash discount posts the card price and takes money off for cash.
What is dual pricing?
Dual pricing means posting both a cash price and a card price for each item. When both prices are clearly displayed before the sale and card customers pay the posted card price, it generally works as a cash discount program. State rules on how prices are displayed still apply.
How much can I surcharge?
Visa's U.S. requirements cap a surcharge at 3% and at the cost of acceptance; Mastercard's U.S. rules cap it at 4% and at the cost of acceptance. State rules may be stricter. Check the relevant state's official source and your processor's requirements before setting a surcharge.