Is it Legal to Make a Surcharge on a Debit Card?

As consumers use debit and credit cards more often than cash or checks to pay for purchases, many merchants find that the card provider charges are really hurting their profits. To offset the losses, companies charge convenience fees or surcharges on debit and credit card transactions. Certain states make such surcharges illegal.

Visa guidelines state that a surcharge is different than a convenience fee. It prohibits merchants from imposing surcharges, as it considers it a discrimination based on a payment type. However, it allows merchants to add convenience fees to debit and credit card transactions. A merchant must disclose the fee and allow a customer to choose another form of payment. A convenience fee is not applicable to face-to-face transactions. It must be a flat fee regardless of a transaction amount. It must be a part of a total transaction. Ten states -- California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Texas -- have made it against the law to charge a fee on credit card processing transactions.

MasterCard does not differentiate between surcharges and convenience fees. The company prohibits merchants from charging a fee for processing a debit or a credit card transaction if they do not apply a processing fee to any other form of payment, such as a check or a PIN-based debit. A merchant may charge a processing fee if the merchant charges on all types of these transactions. MasterCard allows merchants to provide discounts for cash, check or debit PIN-based transactions.

Discover allows merchants to charge a fee on its debit and credit cards if merchants charge the same fees when a customer pays with another brand of card. Likewise, a merchant will have to assess the same fees on Visa and MasterCard transactions if it charges a fee for using a Discover card. Discover states that a fee may not exceed the amount a merchant pays to the company for debit and credit transaction processing.

Many merchants incorporate the fees for debit and credit card processing into their prices or charge convenience fees for online and telephone orders. Some merchants require a minimum purchase for debit and credit card transactions. The minimum amount already includes the fee the merchant pays to the company. Merchants may encourage cash, check and PIN-based transactions by offering small discounts, though they must clearly inform customers about the differences between cash and noncash payments.