Texas credit card surcharges: what a restaurant should check

Texas has had a statute that restricts a surcharge for paying by credit card, and it has been challenged in court. Surcharges are generally treated as allowed in Texas if they are clearly disclosed and stay within the card networks' rules and their cap of 3 percent, and debit and prepaid cards are excluded by the networks. Because the legal position has moved, confirm the current position with your processor and an attorney before you add a surcharge.

What does the Texas statute say?

Texas law has restricted a seller from adding a surcharge for paying by credit card instead of cash, a check or a similar means of payment, and merchants have challenged that rule in court as a limit on speech. Because the legal position has changed over the years and this guide has not confirmed it, read the current Texas statute on the Texas Legislature's website, and ask an attorney what the courts have decided and whether anything has changed since.

What does that mean today?

The way owners and guides now read the position is that surcharges are generally treated as allowed in Texas with clear disclosure, which matches the recorded view that Florida, Texas and Georgia now allow them. That is not the same as a statute being repealed. A cautious restaurant treats the disclosure and the card networks' rules as the real limits and keeps a lawyer's review on file. Ask your processor what it will support, and ask an attorney whether anything has changed.

What do the card networks require?

Networks set conditions for a merchant that surcharges: a cap commonly of 3 percent, notice to the network and your processor before you start, signs at the entrance and register, a separate line on the receipt and no surcharge on debit or prepaid cards. These sit in your merchant agreement and change from time to time, so read the current version.

A worked example of the cost

A restaurant takes $60,000 a month by credit card at an effective cost of 2.9 percent, which is $1,740. A disclosed surcharge of 2.5 percent on credit card sales brings in about $1,500, under the 3 percent cap. Debit sales carry no surcharge. The alternative is to absorb the cost, to build a small amount into menu prices or to offer a cash discount to every customer. Compare each against your own statement before you decide.

What about a service fee on every check?

A fee that applies to every customer, whatever the payment method, is a different thing from a surcharge on card payers. If you add one, name it honestly and show it clearly on the menu, the check and the website, and ask an attorney or the Attorney General's office how Texas treats a disclosed, itemized fee on a consumer sale. A fee that applies only to card payers is a surcharge and falls under the rules above.

How should you disclose a surcharge?

1. Put a sign at the entrance and at the register.
2. Show the percentage on the menu and any ordering page.
3. Show it as its own line on the check and receipt.
4. Tell the guest before they pay.
5. Apply it to credit cards only.

What should you do before you start?

Read the current Texas statute, ask your processor for its current surcharge rules and ask an attorney to review your wording and the legal position. Check how your online ordering page labels each fee. Keep dated copies of your signs and menu wording, and review the policy once a year.

What are the alternatives to a surcharge?

A surcharge is only one way to recover card costs. A cash discount offered to every customer, with the regular menu price shown as the card price, is another, and the card networks treat the two differently, so ask your processor which one it supports. You can also build a small increase into menu prices on the items card guests order most, review your processing rates, or encourage a mix of payment methods with a clear, friendly note at the register. Compare each option against a real month of your own statements before you decide.

How do you decide whether a surcharge is worth it?

Start with the number on your statement: the share of sales paid by credit card and your effective cost on those sales. Then ask whether guests in your neighborhood will accept a visible extra line, and whether staff can explain it in one sentence. A surcharge that creates arguments at the register can cost more in goodwill than it recovers in fees. If you go ahead, start small, keep the wording honest and review it with your processor and an attorney once a year.

What should you tell staff and guests?

Give servers and cashiers one sentence: a surcharge of a stated percentage is added to credit card payments, it is on the menu and the check, and paying with cash or a debit card avoids it. Do not call it a tax or a government fee. If a guest objects, a manager can explain the signs and the policy and record the complaint. Keep dated copies of your signs, menu wording and processor notices, so you can show what you did and when if a question comes up later.

More guides for your business:

• Texas mandatory gratuity and sales tax: the 20 percent line
• Texas gift card rules for restaurants
• Texas tip pooling and service charges for restaurants

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