Montana is generally considered a business-friendly state, and its surcharge laws echo this belief. Merchants can legally impose surcharges on credit card transactions in Montana with few restrictions.
That’s the short version—read on for the full explanation.
Disclaimer: This information is for reference only, and it does not constitute legal advice. Consult with an attorney with any legal-specific questions.
Credit Card Surcharge Fees Are Legal in Montana, Capped at 3%
Merchants can legally surcharge credit card transactions in Montana, but only up to 3% of the transaction. This law applies to merchants, vendors, creditors, and other parties charging a fee when accepting credit card payments.
Montana’s 3% maximum allowable surcharge is lower than the 4% federal limit, but aligns with caps imposed by several card networks.
In addition to the 3% surcharge cap, Montana’s surcharge law also states:
- Merchants must clearly disclose additional fees before processing transactions.
- Financial institutions cannot prohibit merchants from collecting surcharge fees.
- Surcharges must be transparent for consumer protection.
This is all established in Montana LC 350 from 2021, and is now codified in Title 31 of Montana Code Annotated (MCA).
Is Debit Card Surcharging Legal in Montana?
No, debit card surcharging is illegal in Montana.
This restriction isn’t unique to Montana. It’s a federal prohibition that applies nationwide under the Durbin Amendment. Merchants cannot add surcharge fees to debit cards, even if the debit card is processed as a “credit” transaction.
This applies to:
- Traditional debit cards
- Prepaid cards
- HSA/FSA cards
- Any card that accesses funds directly from a bank account
Surcharge Disclosure Requirements for Montana Businesses
Montana requires businesses to disclose surcharge fees prior to the transaction being processed. This transparency requirement ensures compliance and consumer protection.
Here’s what needs to be done.
Before the transaction:
- Clear notification of any surcharge fees before processing the payment.
- Signage posted at points of sale.
- Visible disclosure on websites.
- Verbal notification for phone transactions.
On receipts and invoices:
- Surcharge must appear as a separate line item.
- The label of the fee’s purpose should be clear.
- Total amount of the transaction, including the surcharge, must be displayed.
For different business types:
- Retailers: Post signage at store entrances and checkout areas.
- Restaurants: Print on menus and post signs at payment locations.
- Online businesses: Clear disclosure during the checkout process.
- Service providers: Notifications on quotes and invoices.
State vs. Federal Surcharge Laws in Montana
Federal law limits surcharging to 4% of the transaction amount. But Montana state law supersedes this since the 3% cap is lower.
For example, let’s say a merchant in Montana charged a 4% surcharge fee to customers paying via credit card. They wouldn’t be violating any federal laws, but they’re still subject to state penalties for exceeding the 3% maximum allowable surcharge in Montana.
If a merchant imposed a 5% surcharge, they’d be violating both state and federal surcharge laws.
So the notion that “federal law overrules state law” doesn’t apply here, and it’s a misconception if Montana businesses think they can ignore the state laws because they’re federally compliant.
Montana’s Surcharge Laws Compared to Other States
Montana’s 3% surcharge limit aligns with a small group of states that allow surcharging but cap the amount.
Some states limit surcharging to 3% or the merchant’s cost of acceptance, whichever is lower. Montana doesn’t have this provision, meaning merchants can legally surcharge up to 3% even if their cost of acceptance is lower (say 2%).
One unique aspect of Montana’s law is that the state explicitly says that financial institutions and credit card companies cannot prohibit merchants from imposing this fee.
So acquiring banks or processors can’t prevent merchants from surcharging credit card transactions, which is a fairly business-friendly law, even in a state that has a surcharge cap.
Read More: Credit Card Surcharge Laws in All 50 States
How to Report Surcharging Violations in Montana
If you’re a consumer in Montana who believes a business is violating local surcharge laws, you can report it to the state.
Just file a complaint online directly with the Montana DOJ’s Office of Consumer Protection.
Here at MCC, we don’t offer any consumer-specific services. But we’re genuinely curious if you’re encountering any surcharge fees (legal or illegal) in Montana. So please drop a comment below to let us know how you feel about this, and we’ll pass the information along to any of our clients in your state.
Final Thoughts on Montana Surcharge Laws (With Alternative Options to Consider)
While surcharging is legal in Montana and technically regulated, the 3% cap is still a reasonable amount for businesses. Most businesses would be capped at 3% regardless based on the card network rules, and Montana’s disclosure requirements are pretty standard compared to other states.
That said, just because surcharging is legal in Montana, it doesn’t automatically mean that you should impose additional fees to your customers.
There are definitely pros and cons to surcharging, and losing customers is a reality that many businesses are facing. Recouping that extra 3% usually isn’t worth losing business, and there are other ways you can make up the costs.
- Negotiate a better rate with your processor.
- Optimize your transactions to ensure they’re not downgraded to a more expensive interchange category.
- Consider a cash discount program instead of surcharging.
- Audit your statements for hidden fees and unnecessary charges that are inflating your total processing costs.
If you need help with any of this, contact our team at Merchant Cost Consulting. We’ll help you save money on credit card processing, without switching providers or passing the buck to your customers.