Texas Credit Card Surcharge Law: Limits, Disclosure, and Complaints

Under Texas credit card surcharge law, a merchant can charge you extra for paying with a credit card, but only within limits set by Visa and Mastercard: the fee is capped, it has to be disclosed before you pay, and it cannot be applied to a debit or prepaid card. Texas Finance Code § 339.001 still bans surcharges on its face, but a federal court permanently blocked the state from enforcing that ban in 2018, so the working rules today come from the card networks rather than from Austin.¹

Why the Texas Ban No Longer Applies

Section 339.001 says a seller “may not impose a surcharge on a buyer who uses a credit card for an extension of credit instead of cash, a check, or a similar means of payment,” with an exception for government entities collecting taxes or fees. The statute never gave consumers a private right to sue over a surcharge.²

In Rowell v. Paxton (2018), the U.S. District Court for the Western District of Texas held that the statute regulated how sellers communicate their prices and permanently enjoined the state from enforcing it, following the U.S. Supreme Court’s reasoning in Expressions Hair Design v. Schneiderman.³¹ The section remains on the books but cannot be enforced against merchants. What can be enforced is the private contract every merchant signs when accepting Visa or Mastercard.

Credit Cards Only: Debit and Prepaid Are Off Limits

A surcharge can be applied to a credit card transaction and nothing else. Debit cards and prepaid cards cannot be surcharged, even when you choose “credit” on the terminal instead of entering a PIN.⁴ The card type controls, not the way the terminal routes the payment.

This is the rule most often broken in practice. A debit card carrying a Visa or Mastercard logo looks like a credit card to a cashier and often looks like one on a receipt, but network rules treat it as a debit transaction. If you paid with a debit card and see a surcharge line, the merchant is out of compliance regardless of what the screen said.

How Much a Merchant Can Add

Each network sets its own cap:

Visa: the surcharge cannot exceed the merchant’s actual processing cost for that card, or 3%, whichever is lower.⁴
Mastercard: the surcharge cannot exceed 4% of the transaction amount.⁵

Both networks share one underlying ceiling: the surcharge can never exceed what the merchant actually pays to process the transaction. A business whose processing cost is 2.4% cannot bill you at 3% or 4% just because the network’s headline cap allows it. The lower number wins.

Flat-dollar surcharges deserve a quick sanity check. A $5 fee on a $20 purchase works out to 25% and is well outside any legitimate cap. The math on your receipt should always land at or below the network limit for the card you used.

Disclosure Before You Pay

You are supposed to know about a surcharge before you commit to the transaction. Visa’s rules call for disclosure at two points in a physical store: a sign at the entrance and another notice at the point of sale.⁶ Online, the surcharge has to appear before you click the final purchase button. If it only surfaces on your emailed confirmation, the disclosure came too late.

The receipt has its own requirement. The surcharge must appear as a separate line item with the dollar amount identified.⁴ A merchant who quietly inflates the item price and never breaks the surcharge out is not following the rules, and the receipt itself becomes the evidence.

Cash Discounts and Convenience Fees Are Different

Not every price difference at the register is a surcharge, and telling them apart matters if you want to challenge one.

Cash Discounts

A cash discount starts with a posted price and takes something off when you pay with cash or check. The posted price is the regular price for everyone; cash buyers get a break. That structure has always been legal, and Texas treats a bona fide cash discount favorably for sales tax purposes: the discount reduces the taxable amount, so cash payers owe sales tax on the lower figure. A surcharge, by contrast, is generally part of the taxable total, and you pay sales tax on the surcharge itself.

Convenience Fees

A convenience fee compensates a merchant for offering a payment channel that isn’t the standard one, like paying a utility bill by phone or online instead of by mail. Under Visa’s rules a convenience fee must be a flat dollar amount rather than a percentage, must be disclosed upfront, and can only apply when the channel is genuinely an alternative to the merchant’s normal one.⁷ A sit-down restaurant that tacks a “convenience fee” onto in-person card payments is misusing the label, because taking a card at the table is that restaurant’s standard channel.

Government and educational institutions in Texas have more flexibility. Visa permits those entities to assess fixed or variable service fees on card transactions, which is why property tax offices and universities can add a processing fee when you pay tuition or taxes by credit card.

Sales Tax on the Surcharge

Texas includes credit card surcharges in the taxable amount when calculating sales tax. A $100 taxable item with a 3% surcharge means sales tax is calculated on $103, not $100. If the underlying purchase isn’t subject to sales tax, the surcharge generally follows the same treatment.

Filing a Complaint

If a Texas merchant surcharges your debit card, hides the fee until after you pay, or charges more than the allowable cap, you have two useful places to go.

Texas Attorney General

The Texas Office of Consumer Credit Commissioner directs surcharge complaints to the Attorney General’s Consumer Protection Division rather than handling them itself.⁸ The AG’s office takes general consumer complaints covering “false, misleading, or deceptive business practices,” which includes billing issues.⁹ Include the business name and location, the transaction date, a copy of the receipt showing the surcharge line, and the payment method you used.

The Card Network

Because the enforceable rules are Visa’s and Mastercard’s, reporting through your card issuer is often the faster route. Call the bank that issued your card and describe what happened. The issuer can pass the complaint to the network, which can fine the merchant’s payment processor or pull the merchant’s ability to accept that card brand. This tends to move more quickly than a regulatory filing, especially for a clean violation like a surcharge on a debit card.

Either route runs on your receipt. A receipt with the surcharge broken out as its own line is the single strongest piece of evidence. A receipt with no line item at all is itself a disclosure violation worth reporting.

1
Texas Legislature Online. Bill Analysis C.S.H.B. 3615
2
Justia Law. Texas Finance Code Chapter 339 – Miscellaneous
3
Supreme Court of the United States. Expressions Hair Design v. Schneiderman
4
Visa. U.S. Merchant Surcharge Q and A
5
Mastercard. What Merchant Surcharge Rules Mean to You
6
Visa. Sample Surcharge Disclosure Signage
7
Visa. Visa Rules and Policy
8
Texas Office of Consumer Credit Commissioner. Consumer FAQs
9
Office of the Attorney General. File a Consumer Complaint