The difference in one example
Say a sale is $40.00.
- With a surcharge, the posted price is $40.00. A customer paying by credit card is charged a fee on top, for example 3%, and pays $41.20. Debit card and cash customers pay $40.00.
- With a cash discount, the posted price is the card price, for example $41.40. Customers who pay cash get a discount and pay $40.00.
The customer paying by card ends up in roughly the same place. What changes is which price is the "real" one, and that's what the rules care about.
SAME $40 SALE
SURCHARGE, CREDIT CARD41.20
SURCHARGE, DEBIT OR CASH40.00
CASH DISCOUNT, ANY CARD41.40
CASH DISCOUNT, CASH40.00
Card brand rules for surcharges
- A cap. Visa limits credit card surcharges to 3%, a cap it lowered from 4% in April 2023. A surcharge also can't be more than what card acceptance actually costs you.
- Credit cards only. Debit and prepaid cards can't be surcharged, even when a customer runs a debit card as credit.
- Disclosure. Customers have to be told before they pay: at the entrance, at the register, and on the checkout page online. The surcharge has to appear as its own line on the receipt.
- Notice. Visa expects 30 days' notice before a surcharge program starts, and Mastercard requires registration through your processor.
State rules in 2026
State law sits on top of the card brand rules. As of this writing:
| State | Credit card surcharge | Notes |
|---|---|---|
| Connecticut | Prohibited | Cash discounts allowed, but advertising a cash price and charging a higher card price at checkout is treated as a surcharge. |
| Maine | Prohibited | Cash discounts are the usual alternative. |
| Massachusetts | Prohibited | Cash discounts are the usual alternative. |
| California | No separate surcharge line | Since July 1, 2024 (SB 478), mandatory fees must be in the displayed price. Dual pricing or all-in pricing instead. |
| Colorado | Capped | The lesser of 2% or your actual processing cost. |
| Oklahoma | Capped | Allowed since November 1, 2025, at the lesser of 2% or cost, and only if you also accept cash, ACH or check. |
| New York, New Jersey and several others | Limited to cost | The surcharge can't exceed your cost of acceptance. |
| Kansas | Allowed with disclosure | Point-of-sale disclosure rules apply. |
| Texas | Unsettled | The state statute remains, but federal courts have found these bans unconstitutional. Ask counsel. |
| Minnesota | Restricted | Mandatory fees generally have to be included in the advertised price. |
Everywhere else, surcharges are generally allowed within the card brand rules and with proper disclosure. Laws change, and some cities and industries have their own rules, so confirm before you start.
How a cash discount program works
Your posted prices include the cost of card acceptance, and customers who pay cash get a lower price. Because the card price is the regular price, a cash discount isn't a surcharge under card brand rules, and it's the usual alternative in states that ban surcharges.
It still has rules. Both prices should be clear before the customer pays, signage has to say how the program works, and receipts should show the discount. Connecticut's treatment of card prices above the advertised price is a reminder to set it up carefully.
What the Visa and Mastercard settlement could change
In November 2025, Visa and Mastercard announced a revised settlement with merchants. A federal judge gave it preliminary approval on June 9, 2026, and a final approval hearing is scheduled for November 16, 2026. As proposed, it would lower average interchange by 0.1 percentage point for five years, cap standard consumer credit card interchange at 1.25% for eight years, and give merchants more freedom to surcharge.
None of it is in effect yet. Merchant groups have objected, and analysts have suggested changes may not reach statements for years. We'll update this guide when the court rules.
Which one fits your business
- Surcharge fits a business where most customers pay by credit card, in a state that allows it. On our Hybrid plan, credit card customers pay a 3% surcharge and you pay 1.5% + $0.25 on debit.
- Cash discount fits a business whose customers accept a posted card price, and works in states that ban surcharges. On our Zero plan, you pay only the membership.
- Neither is right if you want every customer to pay the same price. Our Premium plan charges interchange at cost plus one flat membership.
The pricing calculator runs all three with your volume and card mix.
This is a summary for planning, not legal advice. Sources: ArentFox Schiff on Visa's 3% cap; Verifee, surcharge laws by state (2026); PYMNTS, June 2026; Merchant Services of America, October 2026.