Tennessee Credit Card Surcharge Laws

Wondering if you can legally impose a surcharge fee on credit card transactions in Tennessee?

You’ve come to the right place. 

Whether you’re a merchant who wants to pass fees to your customers or you’re a consumer in Tennessee wondering if you’ve been overcharged, I’ll explain everything you need to know about the credit card surcharge laws in Tennessee. 

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 Tennessee?

Yes, surcharging is legal in Tennessee. 

However, merchants must clearly disclose these costs to customers prior to the sale. 

The full price of an item (excluding tax) must include the surcharge fee—meaning if you charge one price for cash and another price for credit cards, you must list both prices.

What About Debit Cards?

No, debit card surcharging is illegal in Tennessee. This is a federal law that applies to all 50 states. 

What is the Maximum Allowable Surcharge Allowed on Credit Card Transactions in Tennessee?

There’s no state law in Tennessee that caps surcharge fees on credit card transactions. However, surcharge fees are regulated at the federal level and are limited to a 4% maximum. 

Furthermore, every card network has its own specific rules for surcharge fees—so you’ll likely be capped at 3% if you choose to impose this fee on your customers.

Let’s look at Visa’s surcharging rules as an example. 

Visa says that surcharges can’t exceed the merchant’s costs of accepting the card, and the maximum allowable surcharge is 3% of the transaction. 

The fee must also be consistent for all card brands. So you couldn’t charge a 3% surcharge fee on Visa cards but 2% on Mastercard and 4% on American Express. 

This Visa rule alone effectively caps you at 3%.

While you technically won’t be breaking the law or subject to legal penalties for charging more, Visa can revoke your right to accept the card and penalize you with fines starting at $50,000. 

A Quick Note About Cash Discounting in Tennessee

Some merchants choose to offer a cash discount in lieu of a surcharge. However, Tennessee’s Attorney General has made it clear that cash discounts can’t be disguised as surcharges.

A cash discount only occurs when the customer pays less than the listed price for using cash. 

If a merchant is only listing the cash price and charging more for credit cards, this is a surcharge. While surcharging is legal in Tennessee, this method is not. The cash price and credit card price must both be listed to stay compliant. 

Other Related Tennessee Laws

In addition to surcharging rules, there are two other highly relevant laws that I want to point out for businesses in Tennessee. One of which is actually in your favor. 

Merchants in Tennessee Cannot Refuse Cash

According to SB 1858, any person or business selling goods or services from a retail establishment in Tennessee cannot force buyers to pay with a credit card or debit card. 

Cash must be accepted if offered.

Otherwise, merchants will be found in violation of Tennessee’s Consumer Protection Act.  

Merchant Services Providers Must Properly Disclose Fees to Businesses

In 2016, Tennessee became the first state in the country to pass a law like this. HB 0547 outlines different rules governing how payment processors must disclose fees to merchants. 

If the processor contracts directly with the merchant to provide settlement services for credit cards, debit cards, and other card transactions, they must clearly disclose all of the following:

• A copy of all network operating rules and operating rules.
• A full schedule of the transaction fees applicable to card types.
• A monthly statement that includes an itemized list of all merchant fees that occurred since the previous statement and an aggregate fee percentage of all fees accruing for transactions during that period. 

Any processor found in violation of this rule is subject to a $2,000 fine per violation.

I found this interesting because it shows how Tennessee’s laws go both ways. Just like merchants are forced to clearly disclose fees to customers, processors are forced to clearly disclose fees to businesses (which isn’t something they always do).

Additional Reading: Credit Card Surcharge Laws For All 50 States

Final Thoughts

Just because surcharging is legal in Tennessee, it doesn’t mean that you should do it. There are other potential repercussions that you should consider before passing these fees to your customers. 

The first thing I’d recommend is trying to lower your current cost of accepting credit cards, which is something you can do without switching processors.

If you’ve never negotiated directly with your current processor or received a rate deduction, there’s a good chance you’re overpaying and there’s likely a solid opportunity for cost savings. 

While this won’t completely offset your cost of acceptance, it’s a logical place to start before you start charging extra fees to customers (who won’t be happy about it).

Contact our team here at Merchant Cost Consulting for assistance. We can help negotiate those rates on your behalf so you can lower your credit card processing fees—without switching providers.