New York Surcharge Laws

Whether you’re a merchant or a consumer in New York, it’s crucial that you understand New York’s credit card surcharge laws. Merchants can use this information to stay compliant, and knowledge of these laws can help customers avoid getting ripped off. 

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

Is Credit Card Surcharging Legal in New York?

Yes, it’s legal to surcharge credit card transactions in New York. But there are strict rules governing how surcharges can be applied.

Effective February 11, 2024, merchants in New York can legally impose a surcharge by following these rules:

• Sellers must clearly and conspicuously post the total price of credit card transactions, including the surcharge, before checkout. 
• The surcharge amount cannot exceed the merchant’s cost of acceptance. 
• The final price of a transaction that includes a surcharge cannot be greater than the advertised price.

This latest iteration of New York’s surcharging rules comes from Senate Bill S1048A—an amendment to New York General Business Law 518 on credit card surcharging. 

It’s also worth noting that the federal government restricts surcharge fees from exceeding 4% of the transaction price. So even if the merchant’s cost of acceptance is greater than 4%, sellers can’t legally impose surcharges higher than 4%.

What’s Allowed

New York Governor Kathy Hochul provided clear guidance to sellers in New York prior to this new law going into effect. 

According to the new law, the following scenarios are all legal:

• All displayed prices are for credit card transactions, which include the surcharge fee.
• Two-tiered pricing systems, in which the credit card price and cash price are displayed side-by-side.
• The listed prices of goods and services are for credit cards, and the business can notify customers that they’ll receive a discount by paying in cash.

The Governor’s office clarified that this is a consumer protection law that is meant to increase transparency and prevent New Yorkers from being surprised with hidden fees. It’s not prohibiting businesses from charging a surcharge fee but rather governs how they notify customers of any fees.

What’s Not Allowed

Any of the situations below are NOT allowed and would be considered illegal in the state of New York:

• The business posts a sign at the door and/or at the register saying a 3% surcharge is applied to credit card transactions.
• The business posts a notice saying that a 4% cash discount is built into all posted pricing, and customers paying with a credit card will see an adjustment on their receipts.
• The business uses other terms, like convenience fee, service fee, processing fee, admin fee, non-cash adjustment, technology fee, etc., as a separate line item for customers paying with a credit card.
• The business lists the price of an item plus a surcharge fee alongside it (Ex: $20 + 4% credit card surcharge).

You can read more about specific guidelines from the New York Governor’s office here. This resource also includes a link to an official guidance document and an educational video with even more examples. 

Penalty For Non-Compliance

Sellers violating the provisions of New York’s surcharge law are subject to penalties of up to $500 per violation. 

This law can be enforced by the director of a municipal consumer affairs office, a commissioner of a municipal consumer affairs office, a town attorney, a city corporation counsel, or any other lawful designee of a municipality or local government office. 

To report a business for non-compliance, you can file a complaint directly with the New York Attorney General or with a local government in the district where the merchant broke the law.

Consumers seeking refunds for excess fees paid to a merchant in New York can file a complaint with New York’s Department of Consumer Protection. 

Is Debit Card Surcharging Legal in New York?

Debit card surcharging is illegal in all 50 states—including the State of New York.

This is a federal law, but New York’s state laws regarding surcharging says that it only applies to credit card transactions. Debit cards and prepaid cards are excluded.

Types of Businesses That Must Follow New York’s Surcharge Laws

New York’s credit card surcharge law applies to all “sellers” in the state. The law defines a seller as any person or business honoring credit cards or debit cards to purchase and/or lease goods, property, and services.

This is intentionally a broad definition that applies to any business or individual selling goods or services in the state.

Restaurants, retailers, barbers, salons, spas, medical businesses, service providers, hotels—all of these business types, and more, must follow New York’s surcharge laws.

Final Thoughts on New York’s Surcharge Laws

New York’s surcharge laws are fairly strict compared to other states that allow credit card surcharging. 

It’s common to see other states restrict surcharging to the cost of acceptance or display notice of the charge, New York requires both of these—and more. 

I think this is likely due to the history of credit card surcharges in New York. 

That’s because New York previously had a no-surcharge law that came under attack by a US Supreme Court. In 2017, the court ruled that this law violated the First Amendment. So New York ultimately took steps to legalize surcharging but in a way that still protects consumers from deceptive pricing practices. 

Just because surcharging is legal in New York, it doesn’t mean that merchants should automatically apply this practice to credit card transactions. What might seem like a quick way to recoup transaction fees can have long-term implications that hurt your business.

A whopping 71% of consumers say they are avoiding businesses that impose a surcharge fee.

So if you feel like your credit card processing fees are high, you may want to consider alternative options—like negotiating your rates directly with your processor. This can help lower your costs without passing those fees to your customers.