Should a business add a surcharge for card transactions?

When is it legal and does it hurt customer loyalty?

Your Business Credit columnist Elaine Pofeldt
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

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Question Dear Your Business Credit,
Hi. I have a small company building a mobile app on which users can pay for meals. They would have a card stored in the app. How do credit card fees work? We would have to pay a processor 2.9 percent of the bill. We want to add a percentage on top of that. Is that the right way? Thank you! – Neil

Answer Dear Neil,
I’m glad you’re looking into the details of accepting credit cards now. It will be important to consider the cost of accepting credit cards as you develop your business model so you can price your services appropriately and still turn a profit.

Credit card processing fees are calculated according to complicated rules that reflect factors such as the riskiness of the transaction. It is worth shopping around for a merchant processor to get the best fees. A good merchant processor will help you find a plan that takes into account the volume of credit card charges that a business like yours is likely to see. Merchant processing deals are very complex, so for insight into what to look for when you shop around, check out our feature “Is it time to negotiate a new merchant account?

You didn’t mention your state, which is relevant to whether you can pass along your processing fees, so I’ll provide a general answer. It is only possible to pass along the 2.9 percent fee to your customers if you are doing business in one of the states that allow it.

Under a court settlement that took effect in January 2013, merchants in most states are allowed to impose a surcharge on customers who pay for a purchase with a credit card. (The ruling does not apply to debit card purchases.) However, some states have banned passing along a surcharge. The states with bans are California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.

In the states that allow surcharges, merchants are allowed to pass along a charge equal to what customers pay to accept the card, up to 4 percent at the moment. Merchants cannot pass along a higher surcharge than what they are paying in swipe fees. For a more in-depth look, see our story “Convenience fees: When is it OK to charge extra to use a credit card?” Bear in mind that the court ruling does not apply to debit cards, so you can’t pass along fees for those transactions.

Even if you are allowed to pass along your credit card processing fees in your state, I’m not sure I would recommend that. Many people don’t like paying an extra fee when they use a credit card. When you are selling a small-ticket item such as an app, it may look like you are nickel-and-diming customers if you add a surcharge. I recently answered a letter from a customer who was frustrated by a 24-cent service charge on a fast-food purchase, which will give you an idea of how customers perceive such added charges. 

My recommendation is to simply set a flat fee for the app that bakes in the cost of processing. You probably are already taking into account other costs in determining how much you need to charge to turn a profit, so I would look at merchant processing in that same holistic way – as part of your overhead.

See related: What is a service charge, and when is it too high?, Credit card surcharges can be costly for business 

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Updated: 03-24-2019