Passing card fees on to customers can save a business thousands a year, and it is one of the most common questions I get. It is also an area where rules come from three places at once: California law, the Attorney General's guidance, and the card brands' own rules. Here is a plain-English summary of where things stand.
Surcharging vs dual pricing vs cash discount
- Surcharge: a fee added when a customer pays by credit card.
- Cash discount: a lower price offered for paying with cash (or another non-card method).
- Dual pricing: showing two prices, a card price and a cash price, so customers see both before they pay.
What California law says
California Civil Code section 1748.1 has prohibited credit card surcharges since 1985. According to the California Attorney General, a federal court held in January 2018 that the law could not be enforced against the businesses that brought that case. Businesses are still prohibited from misleading customers, for example by advertising a lower price than they actually charge.
Since July 1, 2024, SB 478 (California's hidden fees law) requires advertised prices to include all mandatory fees and charges, other than government taxes and certain shipping costs. The Attorney General's FAQ addresses card fees directly: a credit card processing fee is generally not a mandatory fee if the customer can avoid it by paying another way, such as cash. If a business accepts only credit cards, the fee is mandatory and must be included in the advertised price.
Restaurants, bars, and certain food vendors have a separate rule (SB 1524): mandatory fees are allowed if they are clearly and conspicuously displayed on the menu.
What the card brands require
- No surcharging debit or prepaid cards, even when the customer chooses "credit" on the terminal.
- Notify the card brand and your processor at least 30 days before you start (Visa requires this).
- Disclose the surcharge where customers enter (door or website) and at the point of sale.
- Show the surcharge as a separate line on the receipt.
- Keep it at or below your actual cost of accepting the card, and under each card brand's cap. The caps differ by brand and have changed over time, so confirm the current limits with your processor before you set a surcharge.
Why many California businesses choose dual pricing
Because the cash price is lower than the card price, customers never pay more than the price they were shown. That fits the spirit of SB 478 ("the price you see is the price you pay") and avoids the debit card problem, since the card price simply applies to all cards. The catch is that it has to be set up correctly: both prices visible, signage clear, receipts accurate, and your POS configured to handle it.
Common mistakes
- Adding a fee at the register that was not in the advertised price.
- Charging the fee on debit cards.
- Charging more than the processing actually costs.
- Missing signage, or receipts that do not itemize the fee.
- Using "processing fee" software that is not set up for California rules.
The honest bottom line
Dual pricing and compliant surcharging can work well in California, but the details matter and the rules keep evolving. I set these programs up for businesses and keep them current with card brand rules. For legal questions specific to your business, talk to a California attorney.
This guide is general information, not legal advice. Sources: California Attorney General (oag.ca.gov/hiddenfees and oag.ca.gov/consumers/general/credit-card-surcharges) and Visa's U.S. merchant surcharging materials.