Yes, it is generally illegal to charge a 3% surcharge on debit card transactions in the United States. Major card networks (Visa, Mastercard) and federal regulations, such as the Durbin Amendment, prohibit merchants from adding fees to debit or prepaid cards, even if processed as credit. Surcharges are only permissible for credit cards in most states.
The fees are legal for credit cards and they can apply up to what they get charged which is usually 3-4%. Debit cards ususlly cost a small amount like . 05% or less than 1/2 of 1%. So if they charge 4% they are making an extra 3-1/2% plus on every transaction.
In general, a surcharge cannot exceed 3% in the U.S. However, there are exceptions in some states to consider before implementing a surcharge fee. For example, in Colorado, merchants may either: Surcharge a maximum of 2%, or. Charge the actual cost the company pays for credit processing.
State-by-State Legality
As of June 2025 surcharges are prohibited or restricted in the following: California. Connecticut. Maine.
TL;DR. Card brands such as Visa and MasterCard along with state and federal laws prohibit debit card surcharging. Businesses can encourage cash transactions or use credit card surcharging as an additional fee to offset payment processing costs.
There is no prohibition for credit card surcharges and no statute on discounts for different payment methods. Merchants can impose a surcharge of up to 4 percent as long as it doesn't exceed the cost of the merchant's processing fee. There is no statute on discounts for different payment methods.
Use cash where you can
The easiest way to avoid card surcharges is to pay by cash.
A $100 purchase with a 3% surcharge means the customer pays $103 if they use a credit card. If the customer pays with cash or debit, they pay $100.
To avoid extra fees at ATM:
Businesses cannot impose any surcharge for using the following methods of payment: consumer credit cards, debit cards or charge cards. similar payment methods that are not card-based (for example, mobile phone-based payment methods) electronic payment services (for example, PayPal)
The average processing fee for debit card transactions is 34 cents in interchange plus your processor's markup.
In 1985, California passed a law (Civil Code section 1748.1) that prohibited merchants from adding a surcharge (an extra fee) when customers pay by credit card instead of cash.
Currently, 10 U.S. states have surcharging restrictions including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas. Please consult with legal counsel to determine whether your practices comply with relevant state law.
If you believe a merchant has charged an illegal surcharge, you can report the business to your state attorney general's office and the district attorney in the county where the business operates. Businesses may be fined for violating laws prohibiting surcharges.
This fee is deducted from the total amount of the sale before the funds are deposited into the merchant's account. For instance, if a customer makes a $100 purchase and the processing fee is 3%, the merchant will receive $97, with $3 going towards covering the fee.
However, a surcharge specifically for debit card payments is prohibited across all states. Even if the debit card is part of a Visa or Mastercard network and processed as “credit”, it is still a debit card and you cannot impose a surcharge on it.
Debit Mastercard and Visa Debit may cost many merchants around ½ per cent, though for some merchants the cost of these cards is combined with credit card costs. Mastercard and Visa credit may cost many merchants more than ¾ per cent.
Using 90% of your credit limit creates a very high credit utilization ratio, which significantly hurts your credit score by signaling high risk to lenders, though you won't "overdraw" it like a bank account; it can also lead to higher interest rates (Penalty APRs), so it's best to keep utilization below 30%, ideally even lower, by paying down balances.