As more people of all ages turn to plastic instead of checks and cash, merchants up and down Main Street—dentists, veterinarians, restaurateurs and florists—are turning to credit card surcharges and similar policies, such as cash discounts, to help recoup their costs. Ten percent of card-accepting small businesses charge a fee for using a credit card, up from only 2 percent in 2019, estimates the payment consulting group TSG. Among new merchants, as many as 20 percent have a surcharge policy, say TSG.

Here’s what to know about these charges and when it’s best to avoid them.

▶︎ Businesses aren’t fond of fees either. Most businesses don’t like charging extra for paying with a credit card, says Doug Kantor, general counsel for the National Association of Convenience Stores: “Customers get upset with them.” Credit card surcharges may also reduce revenue, reports Ipsos, which estimates they can cause debit and credit card sales to decline by as much as 10 percent.

But some businesses see these surcharges as one of the few tools they have to cut costs, Kantor says. Facing rising labor costs and thinning profit margins, restaurants face a choice, says financial planner Shinobu Hindert. They can either raise menu prices or be transparent about their card fees: “This is how much it costs. We’re passing on this surcharge to you.”

▶︎ Processing fees can be steep. As retailers fight card networks over the fees merchants pay to accept credit and debit cards, known as “swipe fees,” the size of their burden on merchants’ bottom lines is a matter of debate.

Credit card interchange rates—the part of the fee that goes to the bank issuing a card—have been flat for eight years, according to Nick Simpson of the Electronic Payments Coalition (EPC), a consortium of card issuers and payment networks. Data from the Federal Reserve Bank of Kansas City shows a similar trend, although fees for some credit types have climbed more than others.

But data from the Nilson Report also shows that total card-acceptance costs, including fees paid to other behind-the-scene parties, have soared. And a 2024 analysis by consulting firm CMSPI found that U.S. merchants pay the highest credit card acceptance fees in the world, with the average fee at just under 3 percent.

On the other hand, speaking for card issuers and networks, the EPC’s Simpson notes that many merchants benefit from credit card payments because they’re popular with customers and are more efficient to process.

▶︎ Rewards and convenience add to the expense. Merchants’ costs are also climbing because the way people like to pay has changed, says CMSPI chief economist Callum Godwin. The mix is moving away from cheaper-to-accept payment methods like cash, he says, to more expensive methods such as credit cards and buy-now, pay-later agreements.

While younger adults are especially likely to ditch cash in favor of credit, people 55 and up are also using credit and debit more often.

Credit card users who are focused on collecting rewards points or cash-back benefits drive up merchants’ expenses as well, since rewards cards are more costly to process, says payments consultant Richard Crone. The growth of rewards collecting gives retailers more incentive to add a surcharge, especially because some rewards enthusiasts will gladly pay it. “They’ll go through all kinds of weird gyrations in order to earn these points,” Crone says.

▶︎ Rewards and surcharges don’t mix well. It rarely makes sense, though, to pay a surcharge to rack up rewards points. A new Visa rule, for example, caps surcharges at 3 percent. So unless you’re using a 5 percent cash back card—and most no-annual-fee rewards cards offer only 1 to 2 percent back—your points won’t cancel out a fee that high. “You’re in the hole every time,” Crone says. (Even if there is no surcharge, you’ll also lose money carrying a balance month to month while chasing points.)

If you visit an establishment with a surcharge below 2 percent, then some credit cards, such as a 2 to 3 percent cash back card, could recoup the fee. When dining out, you might want cash or a debit card on hand in case a credit card surcharge is too much. That said, for big retail purchases, paying with a credit card offers you greater consumer protection.

▶︎ Not all plastic is the same. Although debit cards tied to a bank account may look like credit cards, these cost less for merchants to process. Card networks forbid collecting a surcharge on debit card transactions, even if they’re handled by a retailer just like a credit card. The same rule applies to prepaid stored-value cards.

Merchants can pay a hefty penalty for charging to use a debit card, but mistakes happen, says TSG senior associate Jeff Fortney, who himself has had to deal with a wayward debit card surcharge. If you’re charged extra for using your debit card, Fortney advises keeping your receipt and contacting your bank to request that the fee be reversed.

▶︎ Rules vary by state. The legality of surcharges, their size limits and their disclosure rules depend on where you are. A new California law, for example, requires any credit card surcharges, if they are imposed, to be included in the up-front advertised price—except in restaurants, where any surcharges to be added to the bill can be disclosed on the menu. Technically, only two states, Massachusetts and Connecticut, completely ban credit card surcharges. In contrast, discounts for using cash or other favored payment methods—a price break, as opposed to a surcharge’s price increase—are allowed everywhere.

In general, all merchants are supposed to disclose surcharges before you pay. Check your state laws to learn what’s allowed, Hindert advises. If a merchant breaks the rules, you can complain to the office of your state’s attorney general.