Credit Cards and Surcharges

A number of businesses allow their business clients to pay their invoices using a credit card.  This is convenient for the business providing the goods or services, as it allows them to receive payment more quickly than a 30- or 60-day invoicing process.  The businesses receiving the goods or services like the system as well, as it allows for a convenient payment method.  Many of those businesses making payments also receive rewards for using their credit cards.

The downside for the businesses being paid is the often hefty service or processing fees charged by credit card companies to process the payments.  Because of those fees, many businesses look to pass along those charges to their business clients who want to pay by credit card. 

Many businesses that allow clients to pay by credit card often add a surcharge of 1.5 to 5 percent onto their bill to cover the credit card payment processing costs.  However, some states have specific rules that don’t allow adding of a surcharge.  Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas all prohibit surcharges.

Many of these laws are being challenged by business groups as an improper restriction on trade.  Interestingly, many of the states that prohibit surcharges do allow a business to charge a higher rate for clients that pay by credit card instead of cash or check.  With this mix of rules and requirements, business owners should consult with their business counsel when considering a credit card surcharge.