As payment processing costs continue to climb, merchants are looking for ways to offset costs without sacrificing their customer bases. Two options emerging across the board in 2025 are dual pricing and surcharging. Though both allow merchants to pass on merchant services payment processing fees to customers, they do so differently—with different compliance requirements and customer perceptions. Therefore, it’s vital for those with merchant services payment processing providers to know the difference. While credit card surcharging makes sense on the surface, it has many restrictions based on state, card network and business type. In comparison, the dual pricing model seems more consumer-friendly in many markets. How a business selects which option impacts profits, reputation and compliance concerns.
What Is Credit Card Surcharging?
Credit card surcharging is when a merchant adds a fee to a customer’s total purchase price to account for credit card processing fees. For example, if you spend $100 at a grocery store, the merchant may add an additional 3% surcharge to pay for the interchange fee and processing costs. While surcharges are legal in many states, they come with many regulatory requirements from Visa, American Express and Mastercard[1][2]. Merchants must display a surcharge as a separate line item on the receipt, assess it on credit cards only, and cap it at certain percentages (usually 3%-4%). While many businesses find this an effective way to offset payment processing costs, surcharging can backfire if customers feel gouged.
What Is Dual Pricing?
Dual pricing—or cash discounting—is when merchants provide customers with two prices: one price for cash transactions, one price for card transactions. Instead of applying a surcharge, businesses implement a higher base price and discount those who pay in cash. This is a common practice in the fuel and hospitality industry and started to expand into more retail and service operations in 2025. It’s generally received better since merchants frame the cash price as a discount rather than punishing credit card users. In addition, like surcharging, it has fewer regulatory requirements across states, although this option is not without its drawbacks.
Why Would a Merchant Want to Implement Either Option?
Merchant services payment processing costs continue to rise, resulting in smaller profit margins—especially for small businesses and high-risk industries. When interchange fees from credit cards or network assessments by card brands combine with processor markups, it’s no wonder that merchants want to share the additional fees (upwards of 3%-5%) with their customers instead of absorbing them altogether. By implementing these systems, customers still have the ability to enjoy credit cards as payment options without fear that their sales will impact other profit-driven costs. However, deciding between surcharging and dual pricing often relies on their marketplace demographics.
Are There Rules in 2025 Regarding This?
Yes! The rules surrounding surcharges and dual pricing vary per state and card brand. For example, some states prohibit surcharging altogether; others have disclosure restrictions. However, card brands require merchants to notify them of the implementation of a surcharge beforehand and require caps between 3%-4% (credit card purchase price over non-surcharge purchase price). Many high-risk merchants face even more complexities between processors who determine more stringent restrictions for themselves based on chargeback history. Dual pricing is generally welcomed but also requires transparency as to how both prices are assessed[3].
How Do Merchant Services Payment Processing Providers Help?
Merchant services payment processing providers help ensure that systems allow for compliant additions/calculations of surcharges to paid titles and disclosure on receipts or registered transaction disclosures. They also help process what’s essentially two prices for dual pricing at checkout. This is especially valuable for high-risk merchants who need compliance-oriented feedback across the board regarding expectations from both customers and merchants alike. Choosing the wrong partner can lead to compliance pitfalls that cost time and money[4].
What Does the Future Hold for Dual Pricing vs. Surcharging?
As payment acceptance costs continue to rise, expect dual pricing and surcharging to be part of the conversation well into 2025 and beyond. Whether consumers like them depends heavily on implementation transparency and communication as well as usage by the industry; if everyone does it, customers are more likely not to fight it. If technological innovations through payment processing ease costs down the line (e.g., AI-adjusted pricing; blockchain settlement), there may be less need for either practice in the future. However, at this time, make your decisions carefully between dual pricing and surcharging depending on compliance expectations and customer considerations.
What Are Six Considerations Merchants Need When Choosing Between Dual Pricing and Surcharging?
Customer Perception
Many customers respond negatively when forced to pay a surcharge, feeling punished for using credit cards. Many businesses find that dual pricing is more positively received since it treats cash payments as a benefit.
Legal Restrictions
Merchants must know what's permitted in their state and by their card networks. For example, some states prohibit surcharging while dual pricing has a broader basis of acceptance.
Industry Standards
Gas stations embrace dual pricing while other businesses may resist surcharges despite merchant preferences.
Complex Compliance
Surcharging requires strict adherence to caps and disclosures while dual pricing has less stringent requirements but still needs transparent signage.
Margin Impact
Both options help offset costs but surcharging transfers fees directly back to credit card holders while dual pricing may require higher pricing across the board that differentials margins.
Processor Acceptance
Not all merchant services payment processing service providers will support the inclusion of surcharging or dual pricing programs; merchants should choose processors that promote them.
FAQ
Q: What is credit card surcharging?
A: Credit card surcharging is when merchants apply an additional fee to credit transactions to help cover processing costs required by credit card networks relative to state mandates.
Q: How is dual pricing different than surcharging?
A: Dual pricing provides two prices—one for cash transactions relative to two price cards—while surcharging adds a fee to the credit transaction price.
Q: Which option is better for customer satisfaction?
A: Dual pricing is generally viewed better since it offers a discount for cash payments rather than adding an additional line item guilt-ridden surcharge for credit cards.
Q: Is surcharging legal everywhere?
A: No! Some states prohibit credit card surcharges, others offer restrictions; merchants should check state mandates before implementation.
Q: What do merchant services payment processing providers do regarding these strategies?
A: They set up systems for compliance—credit card surcharges require proper disclosure while merchant services need to provide transparent revenue reporting for both options through any strategy implementation[5].
Sources
- Visa. “Visa Rules on Surcharging.” Accessed August 2025.
- Mastercard. “Surcharging and Compliance.” Accessed August 2025.
- Federal Reserve. “Payment Systems and Costs.” Accessed August 2025.
- Consumer Financial Protection Bureau. “Consumer Payment Rules and Guidelines.” Accessed August 2025.
- PCI Security Standards Council. “PCI DSS in Payment Processing.” Accessed August 2025.
