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Surcharging, Convenience Fees & Cash Discounting

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Surcharging and cash discount programs are popular ways to reduce the cost associated with processing credit cards at your business. There’s many similarities between the two programs, and – in the end – accomplish the same goal, but different laws and card brand regulations affect their implementation. Before deciding which program works best for your business, it’s important to understand how they both function, and their key differences. 

What is Surcharging?

Due to use agreements with our software partners, merchants who utilize Gravity Payments’ integrated processing (you accept payments through a POS or management software) are unable to utilize surcharging at this time. 

The process of surcharging allows you to pass on the cost of certain credit card fees to your customers by adding a percentage fee to all transactions representing the cost to your business. This can only be applied to customers paying with a credit card, not a debit or prepaid card. 

There are state-by-state and different card brand regulations surrounding surcharging:

State Laws

This is legal* (or anti-surcharging laws are unenforceable due to legal precedent) in US states and territories except California, Connecticut, Colorado, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Utah and Texas. Surcharging in these states and territories remains illegal and Cash Discounting is the only option. 

* Research the rules of surcharging thoroughly and provide any additional disclosures as required by state law.

Surcharging guidelines for each card brand:

General Rules:

  1. Notify your card brands by writing at least 30 days before implementing a surcharge
  2. Properly disclose surcharging through signage at your entrance and register, or on your checkout page. Make sure your customers are aware of it, and disclose as a line item on the receipt. 
  3. You cannot profit from surcharging. The cost is the lower of 3.5% of the transaction amount or the cost of acceptance per transaction.
  4. No surcharging on debit or prepaid cards – even if you run as a credit transaction. 
  5. You can only surcharge cards that are identified as credit cards by card brands (traditional card, business or rewards cards).

Convenience Fees

Different from surcharging, convenience fees are a flat fee applied when a method of payment is considered non-standard. This must “represent payment for the convenience of paying through an alternate payment channel (such as online) that is different from the merchant’s normal payment channel (for example, sending a check in the mail or paying in person)” (Visa, 2022). 

Convenience fees are highly regulated and some card brands, like Mastercard, permit only in special circumstances like government, education, and tax-related payments. 

Please inquire with a Gravity Payments representative to see whether your business qualifies at 866-701-4700. 

What is Cash Discounting?

More commonly-used, cash discounting is the practice of deducting the value of a transaction fee at your business when a customer pays in cash. This is legal in all 50 states. 

It is required by Visa, Mastercard and American Express that you post a Standard Price in your POS or Management Software: This is the cost for your goods as if the customer were to pay with a credit card. Then, you can apply a discount for cash customers. 

Gravity Payments can help you set up cash discounting for both integrated and non-integrated merchants. To learn more, contact us at 866-701-4700.