How to Implement a Compliant Surcharge Program at Your Dealership

You've decided to surcharge credit card transactions. Smart move — dealerships can recover significant processing costs with a well-implemented program.

But "just add 3% to credit cards" isn't how it works. Surcharging has specific legal requirements, card network rules, and operational details that must be handled correctly. Get it wrong, and you're exposed to fines, lawsuits, and customer complaints.

This guide walks through compliant surcharge implementation step by step.

Before You Start: Eligibility Check

State Law Verification

Surcharging is not legal everywhere. Before proceeding, confirm your state allows it:

Surcharging prohibited:

• Connecticut
• Massachusetts
• Puerto Rico

Special restrictions:

• Colorado (limited to actual cost)
• New York (specific disclosure requirements)

If you're in a prohibited state, stop here. Consider cash discount programs instead.

Card Type Limitation

Critical rule: You can only surcharge credit cards. Never debit cards.

This means:

• Your terminals must correctly identify card type
• Debit transactions processed as debit = no surcharge
• Dual-network cards routed to debit = no surcharge

If your terminals can't reliably distinguish credit from debit, you're not ready to surcharge.

Step 1: Calculate Your Surcharge Rate

The Rules

Card networks limit surcharges to the lesser of:

• 3% of the transaction
• Your actual cost of acceptance

Calculating Actual Cost

Your actual cost includes:

• Interchange fees
• Assessment fees
• Processor markup

Pull your processing statements and calculate your effective rate. If it's 2.4%, that's your maximum surcharge (not 3%).

The Safe Approach

Most dealerships set their surcharge at or below their actual cost:

• Simple to defend
• Clearly compliant
• Customers have less room to complain

Step 2: Register with Card Networks

Before surcharging, you must notify the card networks:

Visa

Per Visa's surcharging requirements:

• Notify Visa at least 30 days before starting
• Use the Visa Merchant Surcharge Notification Form
• Submit through your acquirer (processor)

Mastercard

Per Mastercard's merchant surcharge rules:

• Same 30-day advance notice requirement
• Notification process through your acquirer
• Similar form to Visa

Other Networks

American Express, Discover have their own requirements. Your processor should guide you through each.

Who Handles This?

Your payment processor typically manages the registration process. Ask them:

• "How do we register for surcharging?"
• "What's the timeline?"
• "What information do you need from us?"

Step 3: Set Up Your Equipment

Terminal Configuration

Your terminals must be configured to:

1. Identify credit vs. debit cards
2. Apply surcharge only to credit
3. Calculate surcharge correctly
4. Display surcharge as separate line on receipt
5. Process the total (base + surcharge)

Work with your processor to:

• Enable surcharging feature
• Set correct surcharge percentage
• Test thoroughly before going live

Point-of-Sale Integration

If you have POS or DMS integration:

• Does the system support surcharging?
• Does surcharge post correctly to your DMS?
• Is accounting handled properly?

Multiple Terminals

If you have terminals in multiple departments:

• All must be configured consistently
• Same surcharge rate everywhere
• Same card-type detection capability

Step 4: Prepare Required Signage

Card networks require specific disclosures. You need signage:

At Entry Point

Post notice at store entrance stating that a surcharge applies to credit card transactions.

Example text:

"We impose a surcharge of [X]% on credit card transactions. This surcharge is not greater than our cost of acceptance."

At Point of Sale

Similar notice where transactions occur:

• Each cashier station
• Service write-up area
• F&I office
• Parts counter

On Receipts

Every receipt must show:

• Surcharge amount as separate line item
• Clearly labeled (e.g., "Credit Card Surcharge")

The customer should never be surprised by the surcharge.

Step 5: Train Your Staff

What Staff Needs to Know

The basics:

• What surcharging is
• Which cards get surcharged (credit only)
• How much the surcharge is
• Why we're doing it

How to explain to customers:

• "There's a small surcharge on credit card purchases — it covers the fee the card companies charge us."
• "Debit, cash, or check have no extra fee."

What NOT to say:

• Don't call it a "penalty" or "fee for using credit"
• Don't say it's required by law
• Don't be apologetic — it's legitimate

Role-Playing

Practice the conversation:

• Customer asks "What's this surcharge?"
• Customer complains about the surcharge
• Customer wants to switch to debit

Staff should be confident and matter-of-fact, not defensive.

Handling Objections

Customer: "I've never seen this before." Response: "It's becoming more common. The card companies charge merchants significant fees, and this helps us keep our prices competitive for everyone."

Customer: "I want you to remove it." Response: "I can't waive it — it applies to all credit card transactions. But if you'd like to use debit, cash, or check, there's no surcharge."

Customer: "This is illegal." Response: "It's actually allowed by federal law and card network rules in most states. We're registered with Visa and Mastercard to do this."

Step 6: Launch Your Program

Timing

• Complete network registration (30+ day notice)
• Terminals configured
• Signage installed
• Staff trained

Then go live.

Soft Launch Option

Consider starting with one department or location:

• Work out kinks
• Refine staff messaging
• Build confidence

Then expand.

First Week Monitoring

Track:

• Customer complaints (expect some)
• Questions from staff
• Technical issues
• Any debit cards incorrectly surcharged

Address issues immediately.

Ongoing Compliance

Regular Audits

Periodically verify:

• Signage still posted and visible
• Terminals correctly identifying card types
• Surcharge rate hasn't exceeded actual cost
• Staff still trained on messaging

Rate Adjustments

If your processing costs change significantly, adjust surcharge rate:

• Never surcharge more than actual cost
• Document your cost calculation

New Staff Training

Every new employee who handles payments needs surcharging training. Don't let it slip.

Common Compliance Mistakes

Mistake: Surcharging Debit Cards

Problem: Card networks strictly prohibit this. If customers complain, you face fines.

Prevention: Ensure terminals correctly identify debit and don't surcharge.

Mistake: Surcharging Above Actual Cost

Problem: Violates card network rules. Opens you to lawsuits.

Prevention: Calculate actual cost and set surcharge at or below.

Mistake: Inconsistent Surcharging

Problem: Surcharging some credit transactions but not others (except by card type) is not allowed.

Prevention: Apply surcharge consistently to all credit card transactions.

Mistake: Inadequate Disclosure

Problem: Customers surprised by surcharge → complaints and potential violations.

Prevention: Signage at entry, point of sale, and on receipt. Verbal disclosure for phone/card-not-present.

Mistake: Forgetting to Register

Problem: Surcharging without network registration is a violation.

Prevention: Complete registration process before launching.

Monitoring for Success

Metrics to Track

Financial:

• Surcharge revenue collected
• Net processing cost after surcharges
• Impact on processing fees

Operational:

• Customer complaints related to surcharging
• Payment method mix (any shift from credit?)
• Staff questions and issues

Compliance:

• Any debit surcharge incidents
• Customer escalations

Expected Outcomes

• Processing cost recovery of 80-95% (depending on surcharge rate vs. cost)
• Modest shift toward debit (usually 5-15% of volume)
• Initial complaints that taper off

When Things Go Wrong

Customer Disputes a Surcharge

• Review transaction record
• If correctly applied, explain compliance
• If error occurred (debit surcharged), refund immediately

Complaint to Attorney General or Card Network

• Take seriously
• Document your compliance (signage, registration, rates)
• Respond promptly and professionally

Staff Refuses to Enforce

• Revisit training
• Explain business rationale
• Make clear it's not optional

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Get Surcharging Right →

Anchorbase helps dealerships implement compliant surcharge programs with proper setup, signage guidance, and staff training support. Recover your processing costs without compliance risk.