Surcharging Rules, Real Penalties, and How to Keep of the Crosshairs

SignaPay Direct
Oct 27
4 min read

Across the U.S., merchants are being hit with four- and five-figure “surcharging violations” — often without clear findings or instructions for how to fix the problem. These penalties create confusion, slow down merchant communication, and expose portfolios to unnecessary risk.

In this post, we break down the real issues behind these fines, outline the legal specifics for New York and New Jersey, and provide a practical playbook to keep your business and your merchants compliant.

Why This Matters

When fines arrive without details, frustration builds across every level — from merchants to ISOs to processors. Without visibility into what went wrong, merchants can’t correct the issue, ISOs can’t mitigate risk, and processors can’t forecast exposure.

On top of that, state laws like those in New York and New Jersey add additional compliance layers that require clear price displays, specific signage, and limits on how surcharges can be applied. Understanding these laws is critical to maintaining compliant operations and protecting your portfolio.

The Three Pricing Models—Done Right

Every compliant program starts with clarity around the three legal pricing structures:

Surcharging: Added only to credit card transactions and limited to the merchant’s actual cost of acceptance (never exceeding 3%).
Cash Discounting: The posted price is the card price, and customers receive a discount when paying with cash.
Dual Pricing: Two posted prices are displayed — one for cash, one for credit — so customers can choose their preferred payment method.

Fines often arise when these models are mixed or misapplied. For instance, applying a flat fee across all card types (including debit) or using signage that doesn’t match the pricing model in use can lead to brand violations and state penalties.

Understanding New York’s Rules

As of February 2024, New York’s updated General Business Law §518 allows merchants to charge different prices for credit and cash — but the disclosure rules are strict.

The key requirement:If a surcharge is applied, merchants must post the total credit card price clearly and conspicuously before checkout. Customers should see the full amount they’ll pay if they choose to use a card, not just a generic “3% added for credit cards” note at the register.

In practice, that means:

Merchants can either display both prices (cash and credit) or show only the credit-inclusive price with a note that cash payments receive a discount.
Signs that simply say “Additional fee for card use” are not compliant.
Receipts must reflect the full amount charged and cannot misrepresent the price breakdown.

Common violations in New York include:

Register-only signage without shelf/menu price updates.
Receipts showing an added fee line item instead of the full credit price.
POS systems applying surcharges to debit transactions.

To stay compliant, configure systems to hard-cap surcharges at actual cost, block debit BIN ranges, and ensure receipts display total credit prices.

Understanding New Jersey’s Rules

New Jersey’s laws share similar principles but place even stronger emphasis on cost-based limits and advance disclosure.

Merchants in New Jersey can apply a surcharge, but:

It must not exceed the actual cost of credit card acceptance.
The fee must be clearly disclosed before the customer chooses how to pay.

This means signage or digital notices should be visible at the door, menu, shelf, or online checkout page — not just at the register.

Prohibited practices include:

Flat or inflated fees that exceed true processing costs.
“Convenience” or “technology” fees added after the customer decides to pay.
Hidden or misleading line items that don’t reflect a disclosed pricing difference.

Merchants who fail to follow these requirements may be cited under the state’s Consumer Fraud Act, which can lead to fines and reputational harm.

Signage, Receipts, and “Conspicuous Disclosure”

Both states emphasize where customers see pricing as much as what they see.

To comply:

Post clear notices at every decision point — entryways, menus, shelves, and checkout screens.
Show total credit prices (or both prices) in plain view.
Avoid “register-only” or small-font signs.
Ensure all receipts match the program type (dual pricing, surcharge, or cash discount).

Consistency between posted and actual prices is the foundation of compliance.

State Law vs. Brand Rules

Card brand rules (like Visa and Mastercard) set limits on surcharge amounts and debit handling, while state laws govern how prices are displayed and communicated. When the two conflict, merchants must always follow the stricter standard.

For New York and New Jersey, that means following the state’s price display and cost-cap rules, even if brand rules seem more flexible.

Risk Flow and Blind Spots

Fines typically originate at the card brands, flow to sponsor banks, and then get passed down to acquirers, ISOs, and merchants. Without a fines registry or tracking system, prior violations can go undetected — creating ongoing exposure.

Combat this by requiring merchant attestations during onboarding, scheduling quarterly compliance audits, and maintaining photo documentation of signage and receipts.

Due Process and Escalation

When a fine or notice arrives:

Open a case immediately.
Gather photos, receipts, and POS settings.
Match each allegation to specific rule text or statute.
Correct the issue and respond within the designated timeframe.
Keep all documentation for future appeal or portfolio review.

Proactive recordkeeping is often the difference between a small correction and a costly repeat violation.

The Practical Playbook

1. Standardize Onboarding Collect signed attestations covering debit handling, surcharge limits, signage, and state-specific display rules. Store these with each merchant’s account record.

2. Compliance-in-a-Box Provide pre-approved templates for entry signs, menu tags, POS footers, and online checkout disclosures tailored to New York and New Jersey laws.

3. Configure the POS, Not Just the People Use system-level caps, disable debit surcharges, and require receipt disclosures by default.

4. Audit Quarterly Collect and review photo evidence of signage, website screenshots, and receipts. Confirm consistency between posted and charged prices.

5. Respond Like a Regulator Treat every notice as a formal review: collect facts, map them to regulations, and respond with documentation that demonstrates immediate correction.

Who Should Act Now

ISOs and PayFacs managing portfolios with New York or New Jersey merchants
Processors and Acquirers responsible for default POS configurations
Merchant Ops and Compliance Teams ensuring signage and debit handling accuracy
Risk and Legal Leaders preparing for potential brand assessments or disputes