Illinois Credit Card Surcharging Laws: Everything You Need to Know in 2024

Illinois allows merchants to legally surcharge credit card transactions. However, these laws are pretty strict compared to the other states where it’s legal to surcharge. 

Here’s a quick summary of what you need to know:

• Credit card surcharging is legal in Illinois but limited to 1% of the transaction cost or the merchant’s cost of processing the transaction—whichever is lower.
• Sellers in Illinois must provide notice to consumers if a surcharge fee is imposed on credit card payments. 
• Debit card surcharging is prohibited in Illinois (and also illegal in all 50 states).
• Illinois just passed a landmark bill that prohibits card networks, banks, and processors from charging interchange fees on tax and gratuity—which goes into effect on July 1, 2025.

These are the key highlights, but there’s a lot more to unpack about credit card surcharging in Illinois. 

So whether you’re running a business in Illinois and need to stay compliant or you’re a consumer who’s concerned about being charged extra fees, read on to learn more.

Disclaimer: This information is for reference only, and it does not constitute legal advice. Consult with an attorney with any legal-specific questions. 

Understanding the 1% Surcharge Limit in Illinois

Merchants cannot charge higher than a 1% surcharge fee on credit card transactions in Illinois. That’s the absolute maximum allowed—period. 

However, the wording in Illinois House Bill 3128 says that the surcharge limit is 1% OR the cost of processing the transaction, whichever is lower. 

But since the average cost to process a credit card is much higher than 1%, most Illinois businesses that implement a surcharge can safely apply a 1% fee.

This is pretty straightforward, but let’s look at a couple of examples so you can see what I mean. 

Example 1

Transaction Amount: $50

Merchant’s Processing Cost: $1.50

Maximum Allowable Surcharge Fee: $0.50 

Even though it costs the merchant 3% ($1.50) to process this transaction, the most they can charge the consumer is 1%. But the 1% surcharge allows them to recoup some of their processing costs.

Example 2

Transaction Amount: $100

Merchant’s Processing Cost: $0.50

Maximum Allowable Surcharge Fee: $0.50 

In this scenario, the merchant’s cost to process the transaction is just $0.50 or 0.5%. Since the processing cost is lower than 1%, this becomes the new default maximum allowable surcharge for this particular transaction. 

With that said, I’ve been working in the credit card processing space for roughly a decade—and nobody’s credit card processing costs are less than 1% per transaction. So while this example is a good illustration of the law, it doesn’t really apply to any business in Illinois. 

Surcharge Laws in Illinois Apply to All Transactions, and Notice Must be Provided to the Consumer

This is another big part of the Illinois surcharging law that’s often overlooked—it applies to all transactions.

• In-Person Transactions
• Online Payments
• Payments Made Over the Phone

Online sellers and businesses charging cards on file aren’t exempt from these laws. Even though the cost of accepting a payment online or over the phone is likely higher, you’re still limited by the 1% maximum allowable surcharge.

Businesses aren’t allowed to surprise customers with surcharge fees either. In fact, HB 3128 is an amendment to the Illinois Consumer Fraud and Deceptive Business Practices Act. 

To remain compliant, businesses must clearly post and notify customers if they’re applying a surcharge to credit card transactions and how much that surcharge is. 

A Closer Look at the Illinois Interchange Fee Prohibition Act Effective July 2025

On June 7, 2024, Illinois passed a first-of-its-kind bill regulating how interchange fees are applied to tax and tips. Passed by a 5-0 vote, Illinois House Bill 4951 includes the Interchange Fee Prohibition Act.

Effective July 1, 2025, interchange fees cannot be charged tax or gratuity as long as the merchant informs the acquiring bank (or its designee) of the taxes or gratuity at the time of authorization or settlement. 

Let’s look at a sample transaction to see how this would impact a merchant’s processing cost:

Currently, a business in Illinois would pay processing fees based on the grand total amount of $119.94. So if the interchange rate is 2.70% for this particular transaction, the merchant would pay $3.24.

But beginning July 2025, the 2.70% interchange rate would be imposed on the $95 subtotal—not including the tax and gratuity. This would lower the interchange fee to $2.57.

This ultimately reduces the merchant’s interchange cost by more than 20%. 

A lot can happen between now and next July. And I expect the card networks will have something to say about this. So we’ll continue to monitor this in the coming months and keep you updated with any changes.

Final Thoughts on Illinois Surcharge Laws

Apart from the states that outright ban surcharges altogether, the credit card surcharging laws in Illinois are pretty strict. But in addition to protecting consumers, it’s nice to see Illinois pass new merchant-friendly laws to help reduce interchange fees. 

If you’re an Illinois-based merchant and frustrated that you can only recoup 1% of your processing costs in the form of a surcharge, you need to understand that there are other ways to save money on credit card processing. 

While surcharging is often a quick and easy path, it’s far from your only option. Here at Merchant Cost Consulting, our team can negotiate your rates directly with your provider—helping you reduce costs without having to change processors. Get a free audit to find out how much you can save today.