State Surcharge Rules Multiply for Software Providers

State laws governing credit card surcharges are multiplying, creating a complex compliance burden for software providers and their payments partners.

Card Brands vs. State Rules

The current confusion stems from changes made by card brands in 2013 that allowed businesses to add fees to credit card transactions. Many companies have adopted these surcharges, ranging from small bait shops to large e-commerce sites that serve customers across state lines. The problem is not the surcharging concept itself, but the patchwork of state regulations that exist alongside the brand rules.

Peter Michaud, chief payments officer at TSG, explains that merchants must track both card network updates, which happen every six months, and periodic state law changes. Michaud notes that while networks usually provide advance notice, the state environment is less predictable.

Independent software vendors often find themselves in a difficult position. According to Tyler Kattre, president of Wind River Payments, these ISVs act as intermediaries between developers and merchants. The ISVs are not the ultimate decision-makers, yet they are expected to enforce compliance that may conflict with a merchant’s business goals.

The Enforcement Gap

One of the biggest challenges is the lack of a unified directory for state surcharging rules. While most states follow the card brand guidelines, others have stricter or different restrictions. Stripe Inc. notes that surcharging is not permitted in Connecticut, Maine, Massachusetts, or Puerto Rico.

Wind River Payments uses a detailed checklist during consultations to help ISVs and merchants understand the specific requirements they are agreeing to. Kattre advises businesses to seek this clarity now rather than waiting for fines to be issued.