Can Dealerships Charge Credit Card Fees? The Complete Legal Guide

When customers ask to put their $5,000 service bill or $2,000 down payment on a credit card, you're looking at $100+ in processing fees. That stings.

So can you charge a fee for credit card payments? The short answer: usually yes, but the details matter.

This guide covers what's legally permitted, what's prohibited, and how dealerships can recover credit card costs without running afoul of the law.

The Quick Answer

In most U.S. states: Yes, you can charge a fee (called a surcharge) when customers pay by credit card.

In three jurisdictions: No, surcharging is prohibited (Connecticut, Massachusetts, Puerto Rico).

Never: You cannot surcharge debit card transactions.

The Legal Background

The Merchant Settlement (2013)

For decades, Visa and Mastercard's merchant agreements prohibited surcharging. That changed with a 2013 class action settlement that allowed merchants to add surcharges for credit card payments.

What the Settlement Established

• Merchants can surcharge credit card transactions
• Maximum surcharge: 3% or actual cost (whichever is less)
• Disclosure requirements
• Registration requirements with card networks

State Laws Override

Even after the settlement, states can still prohibit surcharging. Several have laws that do.

State-by-State Rules

States Where Surcharging Is Prohibited

Connecticut: Surcharges are illegal. Period.

Massachusetts: Surcharges are prohibited by state law.

Puerto Rico: Surcharging is not permitted.

If you operate in these jurisdictions, you cannot surcharge credit cards. Consider cash discount programs instead.

States With Special Rules

Colorado:

• Surcharging allowed
• But limited to actual cost of acceptance
• Cannot exceed the merchant's cost

New York:

• Surcharging allowed
• Specific disclosure requirements
• Must show total price including surcharge

All Other States

Surcharging is permitted following card network rules:

• Maximum 3% or actual cost
• Proper disclosure
• Registration with networks
• Credit cards only (never debit)

Credit Card vs. Debit Card: The Critical Distinction

This is the most important compliance point: You can only surcharge credit cards.

What Counts as Credit?

True credit cards:

• Visa credit cards
• Mastercard credit cards
• American Express
• Discover

What Counts as Debit?

Debit cards (no surcharge permitted):

• Bank debit cards (PIN-based)
• Visa debit cards (signature-based)
• Mastercard debit cards
• Prepaid cards (in most cases)

The Dual-Network Complication

Many cards can process as either credit or debit. When a customer inserts a Visa debit card:

• If they enter PIN → debit network (no surcharge)
• If they press "credit" or sign → runs on Visa network

The safest approach: Only surcharge when the transaction clearly routes as credit.

Card Network Rules

Even in states where surcharging is legal, card networks impose requirements:

Visa Requirements

According to Visa's merchant surcharging rules:

• Notify Visa 30 days before surcharging
• Maximum 3% or actual cost (whichever is less)
• Surcharge same percentage across card brands
• Disclose at entry, point of sale, and on receipt
• Never surcharge debit

Mastercard Requirements

Mastercard's surcharging policies are similar to Visa:

• 30-day advance notification
• Same fee caps
• Same disclosure requirements
• Same debit prohibition

American Express and Discover

• Have their own rules
• Generally align with Visa/Mastercard
• May have different notification processes

Proper Disclosure Requirements

At Store Entry

Post visible signage stating:

• A surcharge applies to credit card transactions
• The surcharge percentage or amount
• That the surcharge doesn't exceed your cost of acceptance

At Point of Sale

Before the transaction:

• Verbal disclosure (recommended)
• Posted signage at register
• Display on card reader screen

On Receipt

After the transaction:

• Surcharge shown as separate line item
• Clearly labeled ("Credit Card Surcharge" or similar)

Alternatives to Surcharging

If you're in a prohibited state or prefer not to surcharge:

Cash Discount Programs

• Raise prices to include credit card cost
• Offer discount for cash/debit
• Legal everywhere
• Different framing, similar result

No Action

• Absorb processing costs
• Keep pricing simple
• May be appropriate for some customer bases

Payment Restrictions

• Limit credit cards to certain amounts
• Encourage other payment methods
• Not always customer-friendly

Dealership-Specific Considerations

High-Ticket Transactions

Vehicle down payments and large repairs make surcharging particularly valuable:

• $5,000 transaction at 3% = $150 surcharge
• $10,000 down payment at 3% = $300 surcharge

The dollar amounts justify the compliance effort.

Service Department

Service transactions are often smaller:

• $200 oil change at 3% = $6 surcharge
• High volume makes aggregate impact significant

Parts Counter

Mixed bag:

• Small retail transactions
• Large wholesale/commercial orders
• Wholesale customers may push back harder

F&I

Down payments are ideal for surcharging:

• Large transactions
• Customer is already spending big
• One-time transaction (less repeat concern)

Common Questions

"Can I require a minimum purchase for credit cards?"

No, card network rules prohibit minimum purchase requirements. (This is often violated but remains prohibited.)

"Can I add a convenience fee instead of a surcharge?"

"Convenience fees" are different from surcharges and have their own rules. Generally limited to card-not-present or unusual payment channels. In-person retail transactions typically don't qualify for convenience fees.

"What if a customer disputes a surcharge?"

If properly disclosed and applied to a credit card:

• Surcharge is valid
• Explain your compliance
• Offer to process as debit (no surcharge) if they prefer

If the customer persists, you can refund the surcharge to maintain relationship, but you're not obligated to.

"Can I surcharge on phone orders?"

Yes, with proper verbal disclosure before processing. The customer must know about the surcharge before authorizing the transaction.

"What about online payments?"

Yes, with disclosure before checkout completion. Display surcharge during payment process.

The Compliance Checklist

Before surcharging, verify:

☐ State legality — Not in CT, MA, or PR
☐ Card network registration — 30-day notice to Visa/Mastercard
☐ Rate calculation — ≤3% and ≤actual cost
☐ Equipment capability — Terminals distinguish credit vs. debit
☐ Signage — Entry, point of sale, receipt
☐ Staff training — Can explain and enforce correctly
☐ Debit excluded — System prevents debit surcharging

Penalties for Non-Compliance

Card Network Violations

• Fines from Visa/Mastercard
• Potential loss of card acceptance privileges
• Merchant account termination

State Law Violations

In prohibited states:

• State attorney general action
• Civil penalties
• Private lawsuits

Customer Complaints

• Chargebacks
• BBB complaints
• Negative reviews
• Customer loss

Making the Decision

Surcharge If:

• You're in a legal state
• Processing fees are significant
• You can implement properly
• Customer base will accept it

Don't Surcharge If:

• You're in a prohibited state
• You can't distinguish credit from debit
• Your customer base would react very negatively
• Compliance feels too burdensome

---

Implement Compliant Credit Card Fees →

Anchorbase helps dealerships implement legally compliant surcharge programs. We handle the technical setup, guide you through compliance, and ensure you're recovering fees correctly.