Surcharging went from a legal gray area to a mainstream pricing tool in just a few years. In 2026 the rules are moving again: a proposed Visa/Mastercard settlement would loosen how merchants can treat different cards, while state laws — including Colorado's — still set hard limits. Here is what a small business can and cannot do today, and what is likely coming.
Key takeaways
- A surcharge is an extra fee added only to credit card payments. Debit and prepaid cards cannot be surcharged under card-network rules, even when they are run "as credit."
- In Colorado, surcharging has been legal since 2022, but it is capped at 2% of the transaction or your actual processing cost, with specific disclosure language required.
- A handful of states, including Connecticut, Massachusetts and Maine, still prohibit credit card surcharges outright, and several others cap or condition them.
- The 2026 Visa/Mastercard settlement, if it receives final approval, would let merchants surcharge or decline specific card categories, but real-world changes are not expected until late 2026 at the earliest, more likely 2027.
What a credit card surcharge is (and isn't)
A surcharge is a fee added at checkout when a customer pays with a credit card, meant to offset what the business pays to accept that card. It is different from three other things owners often lump together:
- Cash discount / dual pricing: you post one price for cash and a higher price for cards, and the lower price is framed as a discount. The legal treatment is different in many states; our cash discount vs. surcharge comparison walks through how.
- Convenience fee: a flat fee for using an alternative payment channel, such as paying by phone or online when you normally take payment in person.
- Service charge: a fee on every check regardless of how the customer pays, common in restaurants. Because it applies to all payment types, it is not a surcharge. (Our restaurant credit card processing guide covers how this works with Colorado's 2026 pricing law.)
Getting the label right matters, because the rules, caps and disclosure requirements are attached to the label. A "service fee" that only shows up on card payments is a surcharge, whatever the receipt calls it.
The card-network rules that apply everywhere
Before you get to state law, you are bound by your merchant agreement and by the card networks' operating rules. The practical baseline in 2026:
- Credit only. Debit cards, including debit cards run without a PIN, and prepaid cards cannot be surcharged.
- A cap. Visa caps surcharges at 3%, and no network permits a surcharge larger than your actual cost of acceptance. In practice, your state cap or your cost — whichever is lower — sets your ceiling.
- Advance notice. The networks expect you to notify your processor before you start surcharging. Your processor needs to configure the terminal so the surcharge is calculated and shown correctly.
- Disclosure at the door, at checkout and on the receipt. Customers must be told before they pay, and the surcharge must appear as its own line item.
Watch out for "set it and forget it" surcharge programs. Many programs blindly add a flat 3–4% to every card, including debit. That can violate both network rules and state law, and the merchant — not the reseller who sold the program — is the one exposed.
Colorado's surcharge law
Credit card surcharges were prohibited in Colorado until Senate Bill 21-091 amended C.R.S. § 5-2-212, effective in July 2022. Under the current statute, a Colorado business may add a processing surcharge on credit and charge card payments, subject to these limits:
| Rule | What it means for your counter |
|---|---|
| Cap | The surcharge may not exceed 2% of the transaction or your actual cost of processing it, depending on the method you elect and disclose. That is well below the 3% many national programs default to. |
| Payment types | Only credit and charge cards. No surcharge on cash, checks, debit cards or gift card redemptions. |
| Disclosure | The statute specifies notice language that references § 5-2-212, and the notice must be posted in your storefront or, for online sales, on your website. |
| Separate line item | The surcharge must be disclosed and itemized separately from the price of the goods or services. |
If you run a national surcharge program in a Colorado location without adjusting it, you are very likely over the cap. This comes up constantly with restaurants and auto repair shops, where a 3.5% fee on a $1,400 repair ticket draws attention fast. For the exact sign wording and a step-by-step setup checklist, see our guide to complying with Colorado's surcharge law.
Colorado also had a separate swipe-fee fight in 2026. The legislature passed SB 26-134, which would have barred interchange on the sales-tax portion of a card payment, but Governor Polis vetoed it in June 2026. That leaves Colorado's surcharge cap as the main state-level lever for now.
Surcharging in other states
State laws change often, so treat this as a starting map, not legal advice:
- Prohibited: Connecticut, Massachusetts and Maine bar merchants from surcharging credit cards (Maine has narrow exceptions). Puerto Rico also prohibits it.
- Capped or cost-limited: Colorado (2%), Montana (3%), and states such as New York, New Jersey and Nevada that limit the surcharge to your actual processing cost. New York also requires the credit card price to be displayed, not just a percentage.
- "All-in" pricing rules: California and Minnesota have laws aimed at hidden or "junk" fees that require mandatory charges to be included in advertised prices. These can make a typical surcharge program impractical even where it is not banned by name.
- Disclosure-heavy states: a long list of states, including Colorado, Kansas and Virginia, have specific notice requirements.
If you sell across state lines online, the safest assumption is that the customer's state rules may apply. Your processor should be able to tell you which states its program supports.
What the 2026 Visa/Mastercard settlement changes
In June 2026, a federal judge granted preliminary approval to a revised settlement in the long-running swipe-fee litigation between merchants and Visa and Mastercard. As reported, the key terms for merchants include:
- Lower credit interchange for a period of years: an average reduction of roughly 0.1 percentage point for five years, and a cap of about 1.25% on standard consumer credit cards for eight years.
- More flexibility on which cards to accept: merchants would be able to decline certain premium and commercial card categories instead of having to "honor all cards."
- Card-category surcharging and discounting: merchants could apply different surcharges or discounts depending on the card type, instead of treating every Visa or Mastercard credit card the same.
What it does not change matters just as much: it does not cover debit cards or American Express, and it does not override state law. A Colorado business would still be limited by Colorado's 2% cap. Major retail and restaurant groups have objected, and implementation depends on final approval and processor system updates, so most merchants should not expect to see changes before late 2026, and more likely 2027. For the full timeline and what to do in the meantime, see what the 2026 Visa/Mastercard settlement changes at your register.
Should your business surcharge?
Surcharging recovers cost, but it is not free. Before you turn it on, weigh three questions:
- Is your pricing model the real problem? Many businesses that want to surcharge are on flat-rate or tiered pricing that overcharges them in the first place. Moving to transparent interchange-plus pricing often recovers a meaningful share of the cost with zero customer friction. Our guide to credit card processing fees walks through how to check.
- How price-sensitive are your customers? A surcharge on a $5 latte reads very differently from one on a $900 brake job or a catering invoice.
- Can your system do it correctly? It must exclude debit, respect your state cap, print the line item and handle refunds — including refunding the surcharge proportionally.
If you do surcharge, train staff on one short, honest explanation and offer a no-fee option (cash or debit) without making the customer feel cornered.
Surcharge compliance checklist
- Confirm surcharging is allowed in every state you sell into.
- Set the rate at or below your state cap and your actual cost of acceptance.
- Make sure the terminal identifies debit and prepaid cards and does not surcharge them.
- Notify your processor and get the program configured on their side.
- Post notices at the entrance and the point of sale, and on your website for online orders, using any statutory wording your state requires.
- Show the surcharge as a separate line on every receipt.
- Re-check whenever your processing costs change or the settlement terms take effect.
Frequently asked questions
Is it legal to charge a credit card fee in Colorado?
Yes. Since July 2022, Colorado law (C.R.S. § 5-2-212) allows a surcharge on credit and charge card payments, capped at 2% of the transaction or your actual processing cost, with required disclosure. You cannot surcharge cash, checks, debit cards or gift card redemptions.
Can I surcharge debit cards?
No. Card-network rules prohibit surcharging debit and prepaid cards, even when the customer runs a debit card without a PIN. Your terminal has to recognize the card type and skip the surcharge.
What is the maximum credit card surcharge?
Visa caps surcharges at 3%, and no network allows more than your actual cost of acceptance. State law can set a lower cap — Colorado's is 2% — and some states prohibit surcharging entirely.
Does the Visa/Mastercard settlement let me surcharge more?
Not more, but differently. If approved, it would let merchants surcharge or decline specific card categories, such as premium rewards cards. It does not override state caps and does not apply to debit or American Express. Changes are not expected before late 2026.
Is a cash discount the same as a surcharge?
No. A cash discount posts a card price and offers a lower price for cash. It is treated differently from a surcharge in many states, but it has its own disclosure rules and must be set up correctly to stay compliant.
Sources and further reading
- Colorado Revised Statutes § 5-2-212, as amended by SB 21-091
- Colorado Newsline: legislature passes SB 26-134
- PaymentWeek: Polis vetoes SB 26-134
- Summary of the 2026 Visa/Mastercard settlement terms
This article is general information, not legal advice. Surcharge rules change; confirm current requirements with your processor and counsel before launching a program.