Credit Card Surcharging in California: What’s Allowed in 2026

The short answer: many California businesses do add a credit card surcharge today, but it’s a gray area that has to be handled carefully. California’s surcharge ban (Civil Code §1748.1) is still on the books. In 2018 a federal appeals court ruled it unconstitutional as applied to the merchants who challenged it, and the Attorney General has said it will generally apply that decision to similarly situated merchants. On top of state law, card-network rules apply: credit cards only, never debit; capped at your cost of acceptance and no more than 3% on Visa; and disclosed before the customer pays.

Surcharging is one of the most common questions we get from Orange County owners trying to offset rising card costs. Here’s how the pieces fit together.

Is Credit Card Surcharging Legal in California?

California Civil Code §1748.1 says a retailer can’t impose a surcharge on customers who pay by credit card, but may offer a discount for cash or other payment methods. In Italian Colors Restaurant v. Becerra (9th Cir. 2018), the court held that the law violated the First Amendment as applied to the five plaintiff businesses, and limited its relief to them. The statute itself wasn’t repealed.

According to a September 2025 legal memo published by the California New Car Dealers Association, the Attorney General’s website says the AG will “generally apply” the Italian Colors decision to similarly situated merchants. In practice, that’s why surcharging is common in California. It’s also why the details of how you surcharge matter.

How Does SB 478 Affect Surcharges?

California’s Honest Pricing Law requires that advertised prices include all mandatory fees. The Attorney General’s guidance says a card surcharge is generally not mandatory if customers can avoid it by paying another way, such as cash or debit. If you accept only credit cards, the fee is mandatory and must be included in your listed prices. Read more in our post on SB 478 and your fees.

What Do the Card Networks Require?

• Credit cards only. Surcharging debit and prepaid cards isn’t allowed, even when a debit card is run as “credit.”
• A cap. Visa limits surcharges to 3% and no more than your actual cost of acceptance. Mastercard caps at 4% and your cost of acceptance. Your effective cost is the real ceiling.
• Advance notice. The networks require merchants to notify their processor before they start surcharging. Your processor handles the registration.
• Clear disclosure at the store entrance, at the point of sale, and online before checkout.
• A separate line on the receipt showing the surcharge amount.

Networks fine processors for non-compliant surcharging, and processors pass those fines on to merchants. Getting the setup right matters.

Is a Cash Discount a Safer Alternative?

California law expressly allows discounts for paying with cash or other non-card methods. A properly structured cash discount program lists a card price and offers a discount for cash. It’s built on that explicit permission rather than on a court decision, though the posted prices still have to follow SB 478 and card-network rules. Our cash discount vs. surcharge guide compares the two side by side.

Could the Rules Change Soon?

Possibly. A pending settlement between Visa, Mastercard, and merchants would give merchants more flexibility on surcharging and on which card types they accept. The court granted preliminary approval in June 2026, and final approval is expected in late 2026 or early 2027, followed by possible appeals. We’ll update this page when anything changes.

We’re not attorneys, and this isn’t legal advice. For your specific situation, talk to a California business attorney. We can set up a compliant surcharge or cash discount program on the payments side, and show you what your actual cost of acceptance is.

Frequently Asked Questions

Can I surcharge debit cards in California?

No. Card-network rules prohibit surcharging debit and prepaid cards, even when they’re run as credit.

What’s the maximum surcharge I can charge?

Under Visa’s rules, 3% or your cost of acceptance, whichever is lower. Mastercard’s cap is 4% or your cost of acceptance. Most businesses should surcharge no more than their actual effective processing rate.

Do I have to tell my processor before I start surcharging?

Yes. Card networks require advance notice, and your processor has to configure your account and terminals to apply the surcharge correctly.

Is a cash discount program legal in California?

California law expressly allows discounts for cash and other non-credit payments. Your posted prices and disclosures still need to follow SB 478 and card-network rules.

Sources: Italian Colors Restaurant v. Becerra (9th Cir. 2018) · California Civil Code §1748.1 · CNCDA / ArentFox Schiff memo on credit card surcharges (Sept. 2025) · California Attorney General — SB 478 · American Banker — preliminary approval of the card-fee settlement