Card Surcharges Turn Checkout Into a Loyalty Test as Shoppers Push Back

“Over the past few months, it feels like almost every place I eat at is adding a [3% to] 4% fee just for paying with a credit card,” read a November Reddit post. “I get that costs are going up for businesses, but this used to be rare, and now it feels like it’s everywhere. Are you seeing the same thing? Do you just pay it or are you switching to cash?”

Yes, they were. The responses to that post indicated a weary acceptance of surcharges.

But for merchants, it’s a double-edged sword. They see surcharges as a justified hedge against interchange fees, potential increased costs from tariffs and the higher cost of goods. On the other side, they risk alienating consumers with what they see as annoying and unnecessary fees. Is it worth losing a customer over a 4% surcharge?

It’s an active dialogue right now that includes often confusing guidance from card networks and uneven regulations that go state by state. At stake is nothing more or less than the consumer experience.

For merchants, surcharges can feel like a practical way to recover rising payment acceptance costs without constantly repricing menus and service lists. For customers, they can feel like one more fee piled on top of everything else. The friction is no longer theoretical. It’s showing up in surveys, policy fights and growing social media complaints that surcharges are creeping into more everyday transactions.

J.D. Power’s latest merchant services research suggested surcharging has become common enough to be a real business strategy, not a quirky exception. In its 2026 U.S. Merchant Services Satisfaction Study, 35% of surveyed small businesses said they surcharge credit card transactions. Among merchants that surcharge, 32% said customers cancel a purchase when the fee appears at least some of the time.

That’s a blunt warning. A surcharge can recoup margin on completed sales while simultaneously reducing the number of sales that happen at all.

The PYMNTS Intelligence report “Credit Card Surcharges: How Cardholders React to Extra Costs” is consistent with those findings. It revealed that 56% of consumers were “very” or “extremely” likely to switch merchants because of surcharge fees. Another PYMNTS Intelligence report, “How Consumers Perceive Surcharge Prompts,” found that 68% of consumers check most or all receipts because they’re nervous about hidden surcharges.

That’s the tension now playing out in plain view. Merchants see surcharges as cost recovery; many customers experience them as yet another nickel-and-dime fee.

Not Limited to SMBs

This isn’t just a small business phenomenon. The broader swipe fee battle is flaring again in Washington, and that keeps surcharges in the news because they’re one of the few levers a merchant can pull immediately.

Sens. Dick Durbin of Illinois and Roger Marshall of Kansas have reintroduced the Credit Card Competition Act, and Durbin’s office said President Donald Trump endorsed it the same day.

Whether that bill moves or stalls, it underscores that acceptance costs are back in the policy spotlight. Merchants feel the pressure in real time and want solutions that don’t require waiting for legislation or litigation.

State-by-State Bingo

Some jurisdictions still prohibit surcharges outright or restrict them heavily. One reason merchants get tripped up is that many states draw a distinction between a “surcharge” and a “cash discount.”

Connecticut, for example, has consumer guidance stating that a business may not impose a “surcharge” for using a credit card, while cash discounts are generally treated differently.

The legal landscape has also been moving for years through court challenges. Some state surcharge bans have been struck down or limited on constitutional grounds (including in California, Florida and Texas), while other states have shifted toward a disclosure-and-transparency framework rather than outright bans.

Even where surcharging is allowed, some states cap the amount or impose specific “choice” and disclosure requirements. Oklahoma is a timely example because it changed its law in November. Under Oklahoma’s approach, surcharges are permitted but are capped at 2% and require clear signage and customer choice.

Massachusetts is another jurisdiction to watch, as a 2026 bill related to surcharges and fee transparency has been moving through the state process, reflecting the broader trend toward tightening disclosure rules rather than banning surcharges outright. Local reporting on the Massachusetts effort highlights the central policy goal of telling customers about the fee before they are charged and printing it on the receipt.

Then come the card network rules, which are often more detailed than state law and can be more immediate in how they’re enforced.

Visa says merchants in the United States may surcharge credit card transactions in most states but may not surcharge debit or prepaid cards. The surcharge must be capped at the lesser of the merchant discount rate or 3%, and merchants must comply with notice and disclosure requirements. Visa also describes active enforcement, including audits and fines.

Mastercard allows surcharging but caps it at the lesser of the merchant’s average effective rate or 4%, again with disclosure and compliance requirements that merchants have to execute correctly.

Those disclosure requirements deserve special attention because they are where many programs fail and where customers get angry. The functional standard is no surprise. Customers should learn about the surcharge before they commit to paying with a card. That means clear notice in-store and at the point of sale, as well as online disclosures for eCommerce and phone orders. It also means the surcharge appears as a separate line item on receipts.

Several states layer on additional requirements. Minnesota law, for example, requires a posted sign and an oral disclosure when a surcharge is imposed.

The Risk Factor

So why do merchants risk it? The core business case is targeted cost recovery. Many small businesses argue they cannot keep absorbing card costs without either raising prices across the board or cutting quality. Some merchants report that customers accept surcharges when they’re disclosed clearly and framed as a credit-only fee.

Restaurant operators often add the additional rationale that if they raise menu prices instead, the increase can compound, and customers may tip on the higher total. A surcharge, on the other hand, can be framed as a pass-through tied specifically to card usage.

Payment providers have also begun positioning surcharging as a mainstream feature. Toast, for example, pointed customers to automated, industry-compliant surcharging options when it adjusted processing rates, implicitly framing surcharging as one tool for managing acceptance economics.

The customer experience critique is not limited to consumers, either. Visa CEO Ryan McInerney has described surcharging as “not a great customer experience,” suggesting some merchants try it and later pull back. American Express CEO Steve Squeri has warned that higher surcharges are “bad” for consumers.

A surcharge can make the unit economics work, but it can also make customers feel like they are being asked to underwrite the merchant’s cost structure in a way they can’t easily manage in their own lives. Most consumers were happy to pay a modest surcharge to their favorite small business during COVID since stimulus made many feel flush with cash, and everyone wanted to save their local establishments.

Today, given the affordability crisis, consumers feel different. They are not inclined to support being nickel-and-dimed. If a fee offsets a $5 cost to the business today but costs a lifetime customer tomorrow, it isn’t a pricing strategy designed to keep business margins intact. It’s a slow leak in the relationship. And maybe forever.