What Is a Surcharge, and How Do They Work? A Business Guide to Surcharges

A surcharge is an additional fee customers pay for using a service or purchasing a product. Perhaps the most common form of surcharge is a fee for using a specific means of payment, usually a credit card.

You might be familiar with surcharges applied to taking out cash at an ATM, or a delivery charge added to an online order. For businesses, it can often take the form of a government imposed tax. The key takeaway is that a surcharge is a cost added to the value of the goods or service.

By having an understanding of surcharges, you will  be able to ensure that any of your added or increased charges or taxes are shouldered by your customers.

Having a clear understanding of surcharges and how to use them will also help you take payments at a lower cost to your business. For example, being aware of the different surcharges applied by credit card processors will mean you might opt for a cheaper credit card processor to protect your customers – and yourself –  from higher fees.

What is a Surcharge?

A surcharge is an additional charge added to the final transaction of goods or services, and is usually added to cover an expense. One of the most common forms of surcharge applicable to most businesses is a fee added to the bills of customers who pay with a credit card instead of cash.

Credit card processing providers charge a fee for using their service, usually around 1-5% per transaction, which is added to the customer’s bill. Stroud, Willink, and Howard LLC has noted that this charge was passed onto consumers following a lawsuit in 2013 that was brought against Visa and Mastercard.

Surcharges can be found in any industry and in many different situations For example, you may be charged an additional fee for using an ATM that doesn’t belong to your bank, or charged extra for disposing of certain types of waste, such as electronics. Surcharges can also occur in the form of taxes added to certain services or goods, such as an excise tax which is placed on items considered harmful like tobacco or alcohol.

How Does a Surcharge Work?

Surcharges are legal in almost every state, except Connecticut and Massachusetts. In states where surcharges are legal, there are still credit card rules and regulations you need to follow:

Be clear about surcharges before the transaction. Before the sale is finalised, you must make it clear to customers that there is a surcharge. You can do this by posting signs at the register or at the point of sale stating that a fee will be added to the transaction.

There is no surcharge for debit cards. You can only apply surcharges to credit cards, not debit. It’s prohibited for you to charge customers for using their debit cards, so ensure that you avoid this.

List the surcharge on the receipt. You have to include the surcharge on the receipt. You’ll need to include both the percentage and the dollar amount.

Retailers are typically charged anywhere between 1% –  5% per transaction by their card payment providers. This fee has now been passed on to consumers, but you’ll need to ensure that you make customers aware of the surcharge by listing it clearly on the receipt.

Examples of Surcharge Types

Here are a few examples of the different types of surcharges:

Credit card surcharge:

This is a fee added to the total amount of products or services when a credit card is used for the purchase.

ATM surcharge: 

When using an out-of-network ATM, meaning an ATM not in your bank’s network, you may be charged a fee for withdrawing cash.

Delivery surcharge: 

A fee is added to offset the cost of shipping, handling, and fuel when you order from an ecommerce site or food delivery apps.

Fuel surcharge: 

This is a fee added to offset the cost of fuel. This surcharge is typically found in the transportation industry.

Environmental surcharge: 

This fee is added to the total cost of a product or service to offset the environmental impact.


This is a tip given to service workers like waiters or taxi drivers.

How to avoid surcharges

Because surcharges are usually imposed by businesses to cover specific fees, it can be difficult to avoid them. However, there are a number of ways you can try to avoid them:

  • Compare prices: Before making a big purchase, research and compare prices as some businesses may have no or lower surcharges.
  • Don’t use a credit card: Surcharges are usually applied to credit card transactions. To avoid these, you can switch to a different payment method in establishments that have a credit card fee charge, such as using cash.
  • Avoid out-of-network ATMs: You can do this by doing a quick online search for ATMs near you that are in your network.
  • Choose off-peak periods: Surcharges can be applied during peak periods, so to avoid these by planning ahead. We’d recommend making your purchase or scheduling your activities during off-peak periods.

Surcharges may be a point of contention with some customers, so the better you understand them, the easier it will be for you to manage their expectations. 

Understanding that transaction fees will be trickled down to your customers will help you choose the right credit card processor for your business. You can make a more informed decision on which provider is best suited to your business. 

Surcharges will affect your pricing, so when deciding on the right provider, take this into account. Knowing how much the surcharge will be can help you price your products or services competitively.

Written by:
Zara Chechi
Zara is a Payments Expert, specialising in writing about Point of Sale systems. With a Law Degree from City University of London, she has used her legally-honed research and analytical skills to develop expertise in the Business Services world. Featured in FinTech Magazine, she quickly became an expert in payroll, POS systems, and merchant accounts.