FTC Junk Fees Law: What it Means For Credit Card Surcharging

If you’ve been following the news, you’ve probably heard about the Federal Trade Commission’s new crackdown on “junk fees.”

The FTC’s Rule on Unfair and Deceptive Fees officially took effect on May 12, 2025, and it’s already changing how businesses are allowed to advertise and disclose pricing nationwide.

While it may appear that the new rule only affects specific industries, this also has serious implications for merchants adding credit card surcharge fees to transactions. And from my perspective, this is yet another reason why businesses should think twice about surcharging in the first place. 

What is the New FTC Junk Fee Rule?

The new FTC Law on Unfair and Deceptive Fees, also known as the “Junk Fees Rule,” is designed to tackle surprise fees at checkout. It prohibits “bait-and-switch” pricing tactics where the business advertises one price, then charges a higher price when it’s time to pay.

Under the new rule, businesses must:

• Disclose the total price upfront, including mandatory fees.
• Display the total price more prominently than other pricing information.
• Clearly communicate all information related to required fees.
• Disclose any excluded charges (not included in the advertised price) prior to asking for payment.

This law is all about disclosure and transparency. The FTC isn’t banning or preventing businesses from charging additional fees. They’re just saying that businesses can’t advertise and promote lower prices than what’s actually going to be charged.

For example, you can’t advertise concert tickets being sold for $50 when you’re also charging a mandatory $15 service fee. The display price would have to be listed as $65, and then contain a breakdown of all fees.

How the FTC Junk Fee Rule Applies to Credit Card Surcharging

To be clear, the new FTC rule does not ban or prohibit credit card surcharges. It simply regulates how businesses disclose pricing. But the rule explicitly states that pricing must include all mandatory fees or charges that consumers are required to pay and can’t be avoided.

Here’s how credit card surcharges are specifically mentioned in the FTC’s guidance: 

• Businesses are allowed to charge or pass-through payment processing fees (assuming it’s legal in your state).
• If the surcharge fee is mandatory, it must be included in the total advertised price.
• However, if there’s another viable payment option at the point of sale that doesn’t incur a fee (like paying with cash), the fee does not need to be included in the price.
• Surcharge fees still need to be clearly disclosed and included in the final amount before payments are taken.
• The purpose of the surcharge fee or the amount can’t be misrepresented. 

Let’s break this down a bit more to add clarity.

Credit card surcharge fees fall into the FTC’s definition of mandatory fees, assuming they can’t be reasonably avoided. 

For example, let’s say you’re running a cashless business. If you have a 3% surcharge fee added to all credit card transactions, that’s considered a mandatory fee because the customer can’t avoid it. So you’d need to include the total amount (including the surcharge) in your advertised prices.

But if the surcharge fee can be avoided by paying with cash or check, then you don’t have to include the fee in your total advertised price. It does still need to be disclosed and itemized prior to accepting the payment.

It’s also important to understand that the ability for consumers to avoid the fee must be reasonable and apply to the same sales channel. This means that you expect customers buying something online to avoid the surcharge fee by physically going to one of your store locations and paying with cash. You’d still have to include the surcharge in the total advertised price online. 

Types of Businesses and Fees Affected by the FTC Junk Fee Rule

This new rule is primarily targeting live event ticketing and short-term lodging. These are two industries that have long been criticized for junk fees and misrepresenting pricing.

However if you look closer at the examples and terminology used in the FTC’s compliance guide on the Unfair and Deceptive Fees Rule, it’s clear that the ruling applies to any business adding additional fees, service charges, convenience fees, and surcharge fees.

• Live event ticket sales
• Short-term lodging
• Any seller charging mandatory credit card surcharge fees
• Hotels, motels, inns
• Vacation rentals
• Home share platforms (Airbnb, VRBO, etc.)
• Concert venues and box offices
• Sporting event tickets
• Live music and live theater performances

All of these business types must display the total prices, including mandatory fees, upfront.

The rule also states that these pricing rules apply to third-party platforms, resellers, and marketplaces. For example, platforms like Expedia and Booking.com also need to comply with these rules. Same goes for resellers on Ticketmaster and StubHub.

Examples of Fees That Must Be Included in the Advertised Price

Any mandatory fee that a consumer cannot reasonably avoid needs to be part of the total advertised price. Examples include:

• Credit card surcharge fees that can’t be reasonably avoided by paying with another method.
• Mandatory hotel resort fees.
• Cleaning fees on vacation rentals (on platforms like Airbnb and VRBO).
• Required service fees for concerts, sporting events, and live theater tickets.
• Convenience fees applied to all online or mobile ticket sales.
• Administrative charges or processing fees that don’t reflect optional services. 

The common trend here is that the consumer has no real choice but to pay the fee in order to complete the transaction. If the fee is unavoidable in the sales channel where the transaction is taking place, it must be included in the advertised price from the very beginning. 

Fees That Can Be Excluded From the Advertised Price

According to the FTC, only three categories of fees can be excluded from the total advertised price of goods or services:

• Government charges (like state and local taxes)
• Shipping fees
• Optional ancillary goods or services that the customer chooses to add

While these charges don’t need to be included in the advertised price, they still need to be disclosed prior to accepting payments. 

Businesses need to disclose the nature of the fee, the fee’s purpose, the amount of the fee, and for which specific good or service the fee is applied on.

The government charges and shipping fees are pretty straightforward. But I’ve noticed lots of businesses have some confusion about what’s considered an “optional” ancillary good or service. Here are some examples:

• A 3% credit card surcharge fee, if the customer can avoid the fee by paying by cash, debit card, or check.
• Optional trip protection plans on flights and hotels (assuming the customer opts in and the box isn’t pre-selected).
• VIP packages added to a live music ticket that include food and drinks.
• An optional add-on charge to skip the line, check in early, or board the plane first.

A lot of this has to do with common-sense judgment on the part of the business. The whole point of the rule is to be transparent. So if you’re looking for a loophole, you’re not going to find one. 

The verbiage of the rule is designed so that anything you’re forcing the customer to pay for has to be included in the price you’re advertising. Period.

Disclosure Requirements and Misrepresentations

The new rule explicitly requires businesses to make clean and conspicuous disclosures that are easy for people to understand and difficult to miss. 

In simple terms, basic disclosure isn’t enough. Your fees need to be blatantly obvious, and there should be no confusion as to the total price, including mandatory fees or extra charges.

All disclosures must be made in the same manner as the offer. For example, if you have a visual display, the disclosure must be visual. If the offer is visual and audible (like a TV ad), the disclosure must be clearly visual and audible simultaneously.

While the FTC doesn’t specify font types or type sizes, they do say that the total price must be more prominent than other pricing information. 

Your disclosures must also be written in plain language. You can’t write contradictory statements or speak in terms that are difficult to understand. Remember—clear and conspicuous. 

Another key component of this rule is that you can’t misrepresent what your fees are for. Examples of misrepresentations include:

• Charging an “environmental fee” that isn’t actually used to support the environment.
• Saying a fee is “required by law” when it’s not.
• Advertising a price for something that’s not available at the time the offer is made (like a sold-out concert)
• Inflating government taxes and fees as a profit.

All of these examples would violate the new FTC ruling and be considered as unfair or deceptive fees.

Final Thoughts and Why This Matters For Credit Card Surcharging

It’s clear that the new FTC rule was primarily made to target hotels, short-term rentals, and live ticket sales. However, it’s hard to ignore the implications related to credit card surcharges.

In the document the FTC is calling a “small entity compliance guide under the Small Business Regulatory Enforcement Act,” credit card surcharges are mentioned in multiple instances.

So I’m genuinely surprised that this isn’t being talked about more industry-wide.

Surcharging is a risky game for businesses. It seems like a quick way to recoup your processing costs. But state and federal governments continue to take steps toward stricter regulations that favor consumers. 

Obviously, you need to make sure that surcharging is legal in your state before you consider adding a surcharge program. And many states of unique state-specific laws as well that cap surcharges at a specific rate or regulate how you’re disclosing the fees. 

This FTC ruling is just more red tape around something that’s already fairly difficult to comply with. What’s to stop the next ruling from banning surcharges altogether? We’ve seen this happen in multiple states over the last few years. 

Now you lose the ability to claw back that 3-4%, and worse, your processing fees have been rising during the entire time you surcharged your customers. You didn’t care because you were passing the buck, but now you’re stuck with higher fees than you started with.

The decision to surcharge credit cards is ultimately yours. But there are other ways to lower your costs on payment processing that don’t involve burdening your customers or navigating complex legal regulations. And you don’t have to switch providers, either. 

Read More: 9 Surcharging Alternatives to Save Money and Keep Your Customers