Credit card surcharge laws in limbo in California

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,
I read your article "Can a doctor's office charge a credit card surcharge?" I'm in a finance department of a California nonprofit clinic and we have the same question. I noticed the reference you cited is in 2013. I wonder whether it is still true that we can't charge credit card fees to patients? -- Athena

Answer Dear Athena,
Right now this is a gray area for merchants, including physicians. As I mentioned in a recent column ("When buying gasoline for business, watch discounts, surcharges"), California still has a law that blocks all merchants from adding a surcharge when customers pay by credit card. However, that law is currently unenforceable.

According to the Office of the Attorney General in California, California Civil Code section 1748.1 (also called the Song-Beverly Credit Card Act of 197s these surcharges. But a federal court found the law unconstitutional in March 2015 and barred the Attorney General's office from enforcing it. The Attorney General's office has appealed that decision, but until there is a ruling, its hands are tied.

Since this situation is in flux right now, I would suggest holding off on adding a surcharge. I know medical practices are being squeezed from all sides, and it can be a hardship to swallow credit card processing fees. However, my sense is that adding a surcharge and then taking it away if the law becomes enforceable again in the near future will just create confusion for your staff and patients.

What you can do is offer a discount to people who pay cash. As I discussed in a different column, ("Can my business add surcharge for card-paying customers?"), California Civil Code 1748.1 does not prevent merchants from giving a discount to people who pay cash. You do, however, need to post signs informing your patients of the discount. California law says if a merchant offers a cash discount, "but does not fully disclose this to customers prior to their committing themselves to the goods or services, or if the merchant does not clearly explain its policies regarding debit and credit cards, the merchant may be violating California law," according to the Attorney General's website.

There are some downsides to offering a cash discount. One is that it could result in your office staff handling a lot of cash, which can increase the risk of robbery and lead to record-keeping problems. If you're considering this option, do some calculations to figure out how much cash that would be on a typical day. In a multi-physician office, it might really add up, which would mean you'd need a way to securely transport the money to the bank.

That may be more hassle than it's worth. If your practice needs to find ways to offset the rising costs of staying afloat, I'd strongly suggest asking owners of other practices in your area if they can recommend a consultant to help you streamline costs and improve revenue. Hiring a good consultant will more than pay for itself.

See related: Choosing a credit card processor for a medical practice

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Updated: 02-21-2019