California Credit Card Surcharge Laws

Quick Summary:

• Traditional credit card surcharging is effectively prohibited under Senate Bill 478
• All mandatory fees must be included in advertised prices as of July 1, 2024
• Cannot use "drip pricing" - revealing additional charges during checkout
• Restaurants have limited exemptions under SB 1524 with disclosure requirements
• Violations can result in fines up to $1,000 per instance

California's Senate Bill 478, known as the "Hidden Fees Statute" or "Honest Pricing Law," fundamentally changed how businesses can handle credit card processing costs. Rather than banning surcharges outright, California requires total price transparency - businesses must include all mandatory fees in their advertised prices. This makes traditional surcharging models impractical while still allowing businesses to recover credit card costs through adjusted pricing structures.

Legal Disclaimer: This information is for reference only and does not constitute legal advice. Consult with an attorney before implementing pricing programs, as rules can change.

Is Credit Card Surcharging Legal in California?

Traditional credit card surcharging is effectively prohibited in California under Senate Bill 478, which took effect July 1, 2024. While not technically a "surcharge ban," the law requires businesses to include all mandatory fees in their advertised or listed prices.

This means businesses cannot list one price and then add a credit card surcharge at checkout. However, businesses can still recover credit card processing costs by building them into their standard pricing structure.

What's Allowed

California businesses can implement these pricing strategies under SB 478:

• Include processing costs in listed prices - show the total amount customers will pay
• Offer cash discounts - provide lower prices for cash/debit payments
• Use dual pricing - display separate prices for cash and credit card payments
• Breakdown fee components - explain what's included in the total price after purchase
• Restaurant service charges - limited exemptions with clear disclosure requirements

What's Not Allowed

California's SB 478 prohibits these practices:

• Drip pricing - revealing additional mandatory fees during checkout process
• Traditional surcharging - listing base price plus separate credit card fee
• Hidden fees - any mandatory charges not included in advertised price
• Misleading disclosures - unclear or insufficient fee explanations

Penalty For Non-Compliance

California enforces SB 478 violations through multiple mechanisms:

• Civil penalties up to $1,000 per violation under California Civil Code
• Consumer lawsuits under the Consumer Legal Remedies Act
• District attorney enforcement at local and state levels
• Attorney General investigation for patterns of violations

Customers can file complaints with the California Attorney General's Public Inquiry Unit to report potential SB 478 violations or misleading pricing practices.

California Credit Card Surcharge FAQs

How does California's SB 478 differ from traditional surcharge bans in other states?

‍SB 478 doesn't ban surcharges per se - it bans "drip pricing" where businesses reveal mandatory fees after advertising a base price. You can still recover credit card costs, but must include them in your listed price upfront. Other states either ban surcharges completely or allow separate disclosure.

Can California restaurants still add service charges to credit card payments?

‍Yes, but with restrictions. SB 1524 provides restaurants limited exemptions from SB 478, allowing service charges if they're "clearly and conspicuously displayed wherever prices are shown." The charge must be disclosed on menus, websites, and other pricing displays - not just added at checkout.

Do California tech companies need to change their subscription pricing models?‍

SB 478 applies to all mandatory fees, so SaaS companies must include processing costs in their advertised subscription prices. You cannot advertise "$99/month" and then add credit card fees during signup. However, you can offer discounts for annual prepayment or alternative payment methods.

Can California businesses offer cash discounts under the new law?

‍Yes, cash discounts remain legal and are specifically mentioned in California Attorney General guidance. You can advertise a credit card price and offer discounts for cash, check, or debit - this doesn't violate SB 478 because customers pay less than the advertised price, not more.

What happens if a California business violates SB 478 accidentally?‍

Violations carry civil penalties up to $1,000 per instance, but enforcement typically focuses on patterns of violations rather than isolated incidents. However, competitors or consumers can also file private lawsuits under the Consumer Legal Remedies Act, making compliance important even for unintentional violations.