Processing Credit Card Surcharge: Things CPAs and Accountants must Know
  • Tax Planning

Processing Credit Card Surcharge: Things CPAs and Accountants must Know

CPACharge Team
CPACharge Team
  • March 10, 2022 11:59 AM EST
  • | 471 Views

All CPAs and accountants know that it costs money to move money within financial systems. Credit cards too are no exception to it—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 also looking for ways to off-set your costs and operate more efficiently.

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 it's even legal for you to do so in your state.

Below, we’ll break down exactly what surcharging means, including its legal status in the U.S. and what you can do to implement them.


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.

The legal status of surcharging in the U.S. (by state)

Surcharging has been outlawed as an anti-consumer practice in certain states. However, these laws were challenged in such states as New York and California, and other states may follow suit as time goes on.

Below is a list of each state’s surcharging laws (last updated July 2021). If you have any questions about your state’s surcharging laws, please contact your state attorney general.

State

Surcharge Prohibited

Resources

ALABAMA

NO

Alabama Attorney General

ALASKA

NO

State of Alaska Department of Law

ARIZONA

NO

Arizona Attorney General

ARKANSAS

NO

Arkansas Attorney General

CALIFORNIA

NO

California Attorney General

COLORADO

NO

Colorado Attorney General

CONNECTICUT

YES

Connecticut Attorney General

DELAWARE

NO

Delaware Attorney General

FLORIDA

NO

Florida Attorney General

GEORGIA

NO

Georgia Attorney General

HAWAII

NO

Hawaii Attorney General

IDAHO

NO

Idaho Attorney General

ILLINOIS

NO

Illinois Attorney General

INDIANA

NO

Indiana Attorney General

IOWA

NO

Iowa Attorney General

KANSAS

NO

Kansas Attorney General

KENTUCKY

NO

Kentucky Attorney General

LOUISIANA

NO

Louisiana Attorney General

MAINE

NO

Maine Attorney General

MARYLAND

NO

Maryland Attorney General

MASSACHUSETTS

YES

Massachusetts Attorney General

MICHIGAN

NO

Michigan Attorney General

MINNESOTA

NO

Minnesota Attorney General

MISSISSIPPI

NO

Mississippi Attorney General

MISSOURI

NO

Missouri Attorney General

MONTANA

NO

Montana Attorney General

NEBRASKA

NO

Nebraska Attorney General

NEVADA

NO

Nevada Attorney General

NEW HAMPSHIRE

NO

New Hampshire Attorney General

NEW JERSEY

NO

New Jersey Attorney General

NEW MEXICO

NO

New Mexico Attorney General

NEW YORK

NO

New York Attorney General

NORTH CAROLINA

NO

North Carolina Attorney General

NORTH DAKOTA

NO

North Dakota Attorney General

OHIO

NO

Ohio Attorney General

OKLAHOMA

NO

Oklahoma Attorney General

OREGON

NO

Oregon Attorney General

PENNSYLVANIA

NO

Pennsylvania Attorney General

RHODE ISLAND

NO

Rhode Island Attorney General

SOUTH CAROLINA

NO

South Carolina Attorney General

SOUTH DAKOTA

NO

South Dakota Attorney General

TENNESSEE

NO

Tennessee Attorney General

TEXAS

NO

Texas Attorney General

UTAH

NO

Utah Attorney General

VERMONT

NO

Vermont Attorney General

VIRGINIA

NO

Virginia Attorney General

WASHINGTON

NO

Washington Attorney General

WEST VIRGINIA

NO

West Virginia Attorney General

WISCONSIN

NO

Wisconsin Attorney General

WYOMING

NO

Wyoming Attorney General

Credit card surcharging rules

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:

Notify the card brand of your intent to surcharge

Almost every major card brand requires you to notify them of your intention to surcharge. Most brands have a form you can fill out available on their website. Otherwise, you must provide a written letter to your account representative. Fortunately, if you’re using the right online payment solution, this step can be skipped altogether, as they will handle it on your behalf.

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.

Do not surcharge more than the cost of your processing fee

This rule essentially means that you cannot use surcharging as a means to profit. A surcharge cannot exceed 4 percent.

Surcharges must be listed as separate line items

You cannot simply loop your surcharges into each transaction. Whenever a surcharge occurs, it must be listed separately on each invoice.

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 credit cards.

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CPACharge Team

CPACharge Team

CPACharge provides CPAs, EAs, and accounting professionals with a simple, secure way to accept client credit, debit, and eCheck/ACH payments from their office, on their websites or on the go. Trusted by more than 150,000 professionals, CPACharge requires no contracts, setup or cancelation fees and is the only payment solution offered by the AICPA as a member benefit.

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