Credit card surcharges are legal under Michigan credit card surcharge law. The state has no statute banning or restricting them, so Michigan merchants can pass their card processing costs to customers as long as they follow the Visa and Mastercard rules built into their processing agreements and avoid deceptive pricing under the Michigan Consumer Protection Act.1State of Michigan. Credit and Debit Card Surcharges
Because Michigan has no dedicated surcharge statute, the compliance rules a merchant actually has to follow come from two places: the card network agreements the merchant signed with its payment processor, and the general anti-deception provisions of state consumer protection law. Getting either one wrong carries real consequences.
Card Network Rules Michigan Merchants Must Follow
Visa and Mastercard set the operational rules for surcharging, and they apply to any Michigan business accepting their cards. These are contractual obligations, not suggestions. A merchant who surcharges without meeting them is in violation of the processing agreement from day one.
Give 30 Days’ Notice Before You Start
Both networks require written notice to the network itself and to the merchant’s acquirer (the payment processor) at least 30 days before the first surcharged transaction. Visa provides a specific notification form on its website.2Visa. Surcharging Credit Cards – Q&A for Merchants Mastercard imposes the same 30-day advance notice requirement.3Mastercard. Mastercard Credit Card Surcharge Rules and Fees for Merchants Starting to surcharge before the 30 days pass puts the merchant out of compliance immediately.
Stay Under the Cap
The surcharge cannot exceed the merchant’s actual cost of accepting the card, measured by the merchant discount rate for that specific credit card. Mastercard caps the surcharge at 4% of the transaction regardless.3Mastercard. Mastercard Credit Card Surcharge Rules and Fees for Merchants Visa lowered its maximum from 4% to 3% effective April 2023, so a surcharge on a Visa credit card transaction cannot exceed the merchant discount rate or 3%, whichever is lower. Most merchants land somewhere between 2% and 3% because that’s where typical processing costs sit. Rounding up to a clean percentage above actual cost violates the rules.
Disclose at the Door, at the Register, and on the Receipt
A brick-and-mortar Michigan merchant needs a sign at the store entrance and another at the point of sale telling customers that a surcharge applies to credit card purchases.1State of Michigan. Credit and Debit Card Surcharges Visa’s rules require the same point-of-entry and point-of-sale disclosures, plus itemization of the surcharge on the receipt as a separate line.4Visa. Merchant Surcharging Considerations and Requirements Online sellers must disclose the surcharge on the webpage where credit cards are first mentioned as a payment option.
The receipt is where compliance most often fails. The surcharge has to show up as its own line item with the exact dollar amount. Rolling it into the total, or labeling it something generic like “processing fee” without identifying it as a credit card surcharge, creates exposure under both the network rules and Michigan consumer protection law.
Never Surcharge Debit or Prepaid Cards
Surcharges apply only to credit cards. Both Visa and Mastercard flatly prohibit surcharging debit and prepaid cards.3Mastercard. Mastercard Credit Card Surcharge Rules and Fees for Merchants That includes debit cards run with a signature rather than a PIN. Federal law separately prohibits surcharging debit cards. The card type controls, not the processing method. Michigan’s Attorney General notes the state has no law restricting debit card surcharges specifically, but the network and federal prohibitions apply on their own.1State of Michigan. Credit and Debit Card Surcharges
How to Calculate a Compliant Surcharge
The surcharge has to reflect actual cost of acceptance. For Mastercard, that means the average effective interchange rate plus all network and acquirer fees on the merchant’s credit card transactions over the preceding one or twelve months, at the merchant’s option.5Mastercard. U.S. Merchant Class Settlement Mastercard Frequently Asked Questions Merchant Surcharge Visa uses a similar calculation tied to the merchant discount rate for the specific credit card being surcharged.2Visa. Surcharging Credit Cards – Q&A for Merchants In practice, merchants work with their processor to pin down that number and set the surcharge at or below it.
Michigan Sales Tax Applies to the Surcharge
Under MCL 205.51, the sales price of goods includes service costs and other expenses of the seller. Because a surcharge covers the merchant’s card processing cost, it is part of the sales price and is subject to Michigan’s 6% sales tax on taxable transactions. A merchant surcharging a taxable sale should include the surcharge in the taxable amount. If the underlying sale is tax-exempt, the surcharge is exempt too.
Convenience Fees Are Not the Same as Surcharges
Some businesses charge a “convenience fee” to avoid surcharge rules, but the networks treat these as different fees with different requirements. A convenience fee is permitted only when the customer pays through an alternate channel that differs from the merchant’s normal payment method. A government office that ordinarily takes payment by mail might charge a convenience fee for paying online. Visa requires convenience fees to be a flat dollar amount, not a percentage.6Visa. Visa Rules and Policy
A retailer that normally accepts cards in person cannot dress a credit card surcharge up as a “convenience fee” because the label reads better. If the customer is paying through the merchant’s standard channel, the fee is a surcharge and has to follow surcharge rules. Mislabeling invites problems under both the network agreements and the Michigan Consumer Protection Act.
Cash Discounts as a Simpler Alternative
Many Michigan businesses avoid surcharge compliance altogether by offering a cash discount instead. The distinction is legal, not cosmetic: a surcharge adds a fee above the regular price for credit card users, while a cash discount reduces the regular price for cash or check customers. Federal law has recognized the difference since the Cash Discount Act, which amended the Truth in Lending Act to confirm that a discount offered to encourage cash payment is not a finance charge, provided the discount is available to all buyers and disclosed clearly.
Cash discounts don’t require 30 days’ notice to the networks and aren’t subject to the network surcharge caps. The merchant posts a price (which functions as the credit card price) and offers a discount for cash. Compliance turns on transparency: both prices must be clearly displayed, and the discount must be available to every customer.
Michigan Consumer Protection Act Exposure
Even without a surcharge statute, the Michigan Consumer Protection Act (MCL 445.903) reaches deceptive surcharge practices. The Act prohibits unfair, unconscionable, or deceptive methods in trade or commerce, including false or misleading statements about the reasons for or amounts of price adjustments and causing confusion about transaction terms.7Michigan Legislature. Michigan Compiled Laws 445.903 – Unfair, Unconscionable, or Deceptive Methods, Acts, or Practices in Conduct of Trade or Commerce
For a surcharging merchant, the exposure points are familiar: a surcharge that only appears on the receipt, a fee described as a “service fee” without identifying it as a credit card surcharge, or a surcharge applied to debit transactions while customers are told it applies to “card payments.”
What a Customer Can Recover
A customer harmed by a deceptive surcharge practice can sue under MCL 445.911, which allows recovery of actual damages or $250, whichever is greater, plus reasonable attorney’s fees.8Michigan Legislature. Michigan Compiled Laws 445.911 The $250 floor means a small illegal surcharge can produce a judgment far larger than the fee, especially after fees are added.
Reporting a Violation
The Michigan Attorney General’s Consumer Protection Division enforces the Act and has published guidance on card surcharges. Consumers can file a complaint with the division:
- Phone: 517-335-7599, or toll-free 877-765-8388
- Mail: Consumer Protection Team, P.O. Box 30213, Lansing, MI 48909
- Online through the Attorney General’s complaint form
Complaints can also go directly to Visa or Mastercard through their online reporting portals. The networks enforce their own rules, and processor-level fines are usually how a merchant first hears about a problem.
Penalties for Getting It Wrong
Consequences come from two directions. On the network side, Visa and Mastercard can fine the merchant’s payment processor, who typically passes that fine through to the merchant, or revoke the merchant’s ability to process card transactions. Losing card processing is functionally fatal for most retail businesses. Fines tend to escalate: a first violation might bring a warning or modest penalty, but repeated violations can lead to a monitoring program or account termination. Once terminated for cause, getting approved by a new processor becomes significantly harder.
On the legal side, Consumer Protection Act violations expose the business to private lawsuits with the $250 minimum plus attorney’s fees, and to potential enforcement action by the Attorney General’s office. Neither track is expensive to trigger, and both are avoidable by following the network disclosure rules to the letter: notice before you start, a compliant cap tied to actual cost, signs at the entrance and the register, and a separate line item on every receipt.