Iowa’s credit card surcharge laws are very straightforward. Here’s a quick overview of the key points:
- Credit card surcharging is legal in Iowa.
- No state-specific laws restrict or prohibit surcharges.
- Debit card surcharging remains illegal (this is a nationwide law).
- Merchants still must follow federal regulations and card network rules.
- Iowa Consumer Credit Code governs additional charges but doesn’t specifically restrict surcharging on credit card transactions.
That’s the short version, but there’s a lot more to understand.
Whether you’re an Iowa business owner exploring surcharges as a way to recoup processing costs or you’re a consumer who’s concerned about extra charges, this guide has everything you need to know.
Disclaimer: This information is for reference only and does not constitute legal advice. Consult with a local attorney before implementing a surcharge program, as rules and regulations are subject to change.
Are Credit Card Surcharges Legal in Iowa?
Yes, businesses in Iowa can legally add surcharge fees to credit card transactions without violating state laws.
While Iowa’s Consumer Credit Code 537.2501 outlines various charges that can be imposed by creditors and specifically mentions surcharges for bounced checks, there’s nothing that regulates or restricts credit card surcharge fees.
So merchants can follow federal guidance by default—meaning surcharges are legal up to 4% of the transaction amount and only permissible on credit card transactions (not debit cards).
What Else Businesses Need to Know About Surcharging in Iowa
While credit card surcharge fees are legal in Iowa, there are other state and federal consumer protection laws that can come into play here.
So before you just blindly start surcharging credit card transactions, you need to take the following information into consideration.
You Must Clearly Disclose Any Surcharge Fees
Surcharging programs cannot be deceptive, and customers shouldn’t be surprised when they’re hit with additional fees. Here’s how you can comply:
- Post clear signage at the point of entry and the point of sale.
- Add surcharge disclosures to menus and price sheets.
- Surcharge fees need to be itemized separately on all receipts.
- Online transactions should have surcharge notices on the checkout page.
- Customers should be verbally notified of surcharge fees that apply on phone transactions.
Basically, you need to make a reasonable effort to inform your customers that they’ll be charged extra if they pay with a credit card. Surcharges can’t be hidden in the total cost, and customers should be informed before the actual purchase (not after, when it’s too late).
Card Network and Processor Rules Still Apply
All of the four major credit card networks in the US (Visa, Amex, Mastercard, and Discover) have their own rules when it comes to surcharging credit cards. Your credit card processor likely also had some contingencies in your merchant agreement related to surcharge programs.
While violating either of these terms isn’t technically illegal, you could still be subject to fines, penalties, or worse—revoke your right to accept certain cards or have your account terminated for egregious offenses.
You typically need to provide a 30-day advance notice to each card network and your processor before you can start surcharging credit card transactions.
It’s also worth noting that Visa caps surcharges at 3% of the transaction amount Other card networks say that surcharges must be applied equally across all brands, which effectively limits your maximum fee to 3% (even though federal law allows up to 4%).
Make Sure Your Staff is Properly Trained
Your staff becomes your last line of defense against a compliant and non-compliant surcharge program. So anyone who works at the register or accepts payments needs to be informed about how this all works.
One common problem occurs when employees are so accustomed to just adding a surcharge to every transaction. But it’s illegal if they apply this charge to debit cards.
If customers question the fee, your staff must also be trained to inform them of the purpose of the fee and what it covers.
For businesses that commonly accept card payments over the phone, verbal disclosure here is crucial because the customer doesn’t have any visual confirmation of the charges being applied during the transaction.
What Consumers Should Know About Iowa Credit Card Surcharge Fees
For consumers buying goods or services in Iowa, yes—you might encounter some surcharge fees at different businesses. This is perfectly legal as long as the surcharge is clearly disclosed prior to the transaction, only applied to credit cards, and doesn’t exceed 4%.
If merchants are violating these rules, there are several ways you can file a complaint with Iowa’s Attorney General’s Office Consumer Protection Division:
Online: Fill out this form
Phone: 515-281-5926 or 888-777-4590
Fax: 515-281-6771
Mail:
Office of the Attorney General of Iowa
Consumer Protection Division
Hoover State Office Building
1305 E. Walnut Street
Des Moines, Iowa 50319-0106
We also invite you to drop a comment on this blog to let us know if you’ve paid a surcharge fee when buying something in Iowa. While we don’t offer consumer-specific services here at MCC, we’ll pass your opinions to businesses we work with, which can ultimately help them decide whether or not a surcharge is worth it for them.
How Iowa’s Surcharge Laws Compare to Other States
Iowa’s credit card surcharge laws are very relaxed compared to other states.
Certain states ban surcharging altogether, while some regulate it—like capping fees at 2% or not allowing surcharges to exceed processing costs. Other states even have stricter rules on disclosures and how prices are displayed.
Iowa doesn’t have any state-specific restrictions, so federal law becomes the default.
Read More: Credit Card Surcharge Laws by State
Alternatives to Surcharging Credit Cards in Iowa
There are plenty of reasons why businesses shouldn’t surcharge their customers. So before you implement a surcharge program, you can consider these alternatives:
- Offer a discount for customers paying cash.
- Set a minimum transaction amount for card payments.
- Raise your prices to account for processing costs.
- Negotiate a lower rate with your processor.
We have a full list of surcharging alternatives with more details on how to approach them.
Applying these ends up being a net win for everyone. You’ll end up saving money on processing without passing those costs to your customers (which risks losing them for good).
Final Thoughts
Surcharging is a controversial topic nationwide. Businesses are fed up with high processing costs, but customers don’t feel like the buck should be passed to them.
Just because you can surcharge credit card transactions in Iowa, it doesn’t mean that you should. At the end of the day you need to ask yourself if you’re willing to lose a customer over 3%. Most businesses aren’t, so you’re likely better off eating the costs and taking other steps to lower your credit card processing fees.