Colorado Credit Card Surcharge Laws

Quick Summary:

Credit card surcharging in Colorado became legal in July 2022, giving businesses new options to offset processing costs.

• Maximum surcharge: 2% of transaction value OR the actual merchant processing fee
• Mandatory disclosure: Specific notice language required at point of sale and online
• Debit card prohibition: Surcharges cannot be applied to debit cards, cash, checks, or gift cards
• Criminal penalties: Willful violations may result in misdemeanor prosecution under the Consumer Credit Code
• Receipt requirement: Surcharges must appear as separate line items on customer receipts

Colorado's Senate Bill 21-091 reversed a 22-year ban on credit card surcharging, joining most other states in allowing businesses to pass processing costs to customers. The law requires strict compliance with disclosure rules and caps surcharge amounts to prevent merchant abuse while protecting consumers through transparency requirements.

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

Is Credit Card Surcharging Legal in Colorado?

Yes, credit card surcharging is legal in Colorado as of July 1, 2022, when Senate Bill 21-091 took effect. The law allows merchants to impose surcharges on credit card transactions but includes specific requirements and limitations that businesses must follow.

Colorado law gives merchants flexibility by allowing them to choose between two surcharge models: they can either charge a flat 2% on all credit card transactions or charge the exact amount they pay in processing fees for each transaction. This dual approach recognizes that processing costs vary while providing a simple option for businesses that prefer consistent pricing.

What's Allowed

Colorado businesses can legally implement these credit card surcharge practices:

Two surcharge options:

• Flat 2% surcharge on all credit card transactions
• Variable surcharge equal to actual processing fees (merchant discount fee)

Required disclosures:

• Specific statutory language displayed at physical locations
• Online disclosure before transaction completion
• Separate line item on customer receipts

Compliance requirements:

• Clear notice posted at point of sale or store entrance
• Online businesses must display notice before checkout
• Surcharge itemized separately from base price

What's Not Allowed

Colorado's surcharge law prohibits these practices:

Prohibited surcharge applications:

• Debit card transactions (even signature-based debit)
• Cash payments
• Check payments
• Gift card redemptions

Improper disclosure:

• Hidden fees revealed only at payment
• Unclear or incomplete notice language
• Failing to itemize surcharge on receipts

Excessive charges:

• Surcharges exceeding 2% or actual processing costs
• Using surcharging to generate profit beyond cost recovery

Penalty For Non-Compliance

Colorado enforces surcharge violations under the state's Consumer Credit Code, which carries serious penalties:

Criminal prosecution: Merchants who willfully violate surcharge laws may face criminal misdemeanor charges, making Colorado's penalties among the strictest in the nation.

Civil liability: Violating merchants are subject to liability as creditors under the Consumer Credit Code, which includes civil penalties and potential lawsuits.

Administrative action: The Colorado Attorney General's Consumer Credit Unit can investigate complaints and take disciplinary action against non-compliant businesses.

Consumer reporting: Customers can file complaints through Stop Fraud Colorado or contact the Consumer Credit Unit at uccc@coag.gov or (720) 508-6012.

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Colorado Credit Card Surcharge FAQs

What exact language must Colorado merchants use for surcharge notices?

Colorado requires specific statutory language depending on your surcharge model. For 2% surcharges: "To cover the cost of processing a credit or charge card transaction, and pursuant to section 5-2-212, Colorado Revised Statutes, a seller or lessor may impose a processing surcharge in an amount not to exceed 2% of the total payment made for goods or services purchased or leased by use of a credit or charge card. A seller or lessor shall not impose a processing surcharge on payments made by use of cash, a check, or a debit card or redemption of a gift card."

Can Colorado businesses surcharge signature-based debit transactions?

No, Colorado law explicitly prohibits surcharges on all debit card transactions, regardless of whether they're processed with a PIN or signature. The law distinguishes between credit and debit cards based on the card type, not the processing method.

How do federal and card network rules affect Colorado surcharges?

While Colorado allows up to 2% surcharges, federal law caps all surcharges at 4%, and Visa/Mastercard typically limit surcharges to 3%. In practice, most Colorado merchants won't hit these limits since the state cap is lower, but businesses choosing the "actual cost" option need to monitor that their fees don't exceed federal limits.

What happens if my processing costs exceed 2% in Colorado?

If your actual processing fees exceed 2%, you can choose the "merchant discount fee" option instead of the flat 2% rate. However, federal law still caps surcharges at 4% regardless of your actual costs. If you're paying more than 4% in processing fees, this may indicate you're overpaying for payment processing services.

Are there any businesses exempt from Colorado's surcharge laws?

The law applies to all sellers and lessors in Colorado without specific industry exemptions. However, state and local government agencies had surcharge authority before the 2022 law change. Professional service providers should also check with their licensing boards, as some professions may have additional ethical rules regarding fee structures.

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