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For a long time there was a ban in place in several states prohibiting businesses from adding a credit card surcharge to a customer’s bill. Recently, however, several states struck down these bans, allowing merchants to raise the credit card fees by passing the charge on to their customers.

States Holding Onto the Surcharge Ban

There are only four states, plus the U.S. territory Puerto Rico who have held onto the ban: Colorado, Connecticut, Kansas, and Massachusetts. In these states it is still illegal for businesses to impose a credit card surcharge.

What the Surcharge Means

When a business conducts a transaction using a credit card, they are charged a merchant fee by the credit card company – usually around a 3% fee. So, why pass this fee along to the customer? According to the internet publication Money, “From the consumer’s standpoint, credit card merchant fees are just another cost of doing business. Other costs include real estate, energy, labor, taxes, insurance, raw materials and necessary equipment.”

A Simple Way to Avoid Surcharges

Some businesses, in an effort to avoid having to pay merchant fees and pass that cost along to customers, are choosing to offer discounts for cash payments. Money finds that, “While surcharges may or may not be legal or within the rules of the payment network, there’s a similar option that’s always acceptable. Merchants have always had the option to offer a cash discount on the advertised price. This way, consumers will never pay more than the advertised price, regardless of which method of payment that they choose.”

The bottom line is that businesses who do add surcharges to a customer’s bill should be wary of doing so lest they end up with frustrated customers who wind up taking their business elsewhere. Allowing for cash payments – and even promoting them through cash discounts – is a better way to entice customers and bring them back time and again.