What happened to the proposed 1% surcharge cap in Illinois?

Illinois Representative Jonathan Carroll sponsored House Bill 3128 in 2021, which would have limited surcharges to 1% or actual processing costs, whichever was lower. However, this bill never made it out of the House and is considered dead. Current Illinois law follows federal guidelines without additional state caps.

How does Illinois's new interchange fee law affect B2B transactions?

If it ever takes effect, the Interchange Fee Prohibition Act would primarily benefit businesses with significant tax and tip components, like restaurants and service providers — but the law has been delayed to July 2027, is permanently enjoined for most financial institutions, and regulates card networks and issuers rather than merchants. For large invoice-based payments, Nickel's free ACH processing is more cost-effective than credit cards for wholesale distributors and contractors either way.

Do Illinois disclosure requirements apply to online businesses?

Yes, Illinois surcharge disclosure requirements apply to all transaction types: in-person, online, and telephone. Online businesses must clearly notify customers about surcharges before payment completion, whether through website displays, checkout notifications, or payment system alerts. The Consumer Fraud and Deceptive Business Practices Act prohibits surprise fees regardless of transaction channel.

Can Illinois bookkeepers and accountants help clients implement surcharge programs?

Accounting professionals can advise clients on the financial implications of surcharging and help with compliance documentation, but should recommend legal counsel for specific implementation details. Illinois's straightforward surcharge laws make compliance relatively simple, but businesses should still document their notification procedures and ensure surcharges don't exceed actual processing costs.

How will the interchange fee law enforcement work in practice?

As written, the Illinois Interchange Fee Prohibition Act would include civil penalties of $1,000 per transaction, with entities required to refund improperly collected fees. In practice, enforcement is on hold: the effective date has been delayed to July 1, 2027, and a June 2026 federal injunction permanently blocks the law for national banks, out-of-state banks, and card networks — only Illinois-chartered banks and credit unions remain subject, with appeals continuing. There is nothing merchants need to implement today.

Illinois Credit Card Surcharge Laws

Illinois takes a balanced approach to credit card surcharging, allowing businesses to offset processing costs while maintaining consumer protection requirements. The state made national headlines by passing the first-of-its-kind Interchange Fee Prohibition Act — though that law has never taken effect: its start date has been pushed to July 2027 and a June 2026 federal injunction permanently blocks it for most financial institutions. For businesses, the rules that matter today are the surcharge and disclosure requirements below.

Illinois's approach reflects the state's history of payment reform advocacy, led by Senator Dick Durbin who previously championed debit card interchange caps in the Dodd-Frank Act.

Legal Disclaimer: This information is for reference only and does not constitute legal advice. Consult with an attorney before implementing any surcharge programs, as federal and card network rules still apply.

Is Credit Card Surcharging Legal in Illinois?

Yes, credit card surcharging is completely legal in Illinois. Currently, there are no state-specific laws prohibiting credit card surcharges, allowing businesses to follow federal guidelines and card network rules.

No federal law caps credit-card surcharges for Illinois merchants — the limits come from card-network rules: Visa caps surcharges at 3%, Mastercard at 4%, and no network permits surcharging above your actual cost of acceptance. The state requires businesses to provide clear notice to consumers before imposing surcharge fees, as governed by the Illinois Consumer Fraud and Deceptive Business Practices Act.

The state's progressive stance on payment processing extends beyond basic surcharge permissions. Illinois was the first state to attempt prohibiting interchange fees on taxes and tips, though the law has been delayed to July 2027 and enjoined for most institutions — a signal of the state's posture on processing costs, not a rule merchants must act on today.

What's allowed in Illinois

Illinois businesses can implement comprehensive surcharge programs including:

Standard credit card surcharges up to card network caps (Visa 3%, Mastercard 4%) or actual processing costs, whichever is lower
All transaction types - in-person, online, and telephone transactions are all covered by the same rules
Clear disclosure programs - signage, verbal notice, or payment system notifications
Dual pricing models - displaying separate cash and credit card prices
Convenience fees for alternative payment channels like phone payments when not standard practice

What's not allowed in Illinois

Illinois businesses must avoid these prohibited practices:

Debit or prepaid card surcharges - prohibited by card network rules in every state, regardless of how the card is processed
Undisclosed surcharges - surprise fees violate the Illinois Consumer Fraud and Deceptive Business Practices Act
Excessive surcharges - cannot exceed actual processing costs or card network caps
Profit-making surcharges - fees must reflect actual costs, not generate additional revenue
Interchange fees on taxes and tips - would be prohibited under the Interchange Fee Prohibition Act, now delayed to July 2027 and enjoined for most institutions

Penalties for non-compliance in Illinois

Illinois enforces surcharge compliance through multiple mechanisms:

Consumer fraud violations under the Illinois Consumer Fraud and Deceptive Business Practices Act
Card network fines ranging from $1,000 to $1 million for violations
Civil penalties up to $1,000 per transaction for interchange-fee violations — only if the IFPA ever takes effect (July 2027 at the earliest)
Consumer complaint investigations through the Illinois Attorney General's office

Consumers can file complaints about improper surcharging by contacting:

Illinois Attorney General Consumer Protection Division
Consumer Fraud Hotlines:

Chicago: 1-800-386-5438
Springfield: 1-800-243-0618
Carbondale: 1-800-243-0607
Spanish Language: 1-866-310-8398

Online complaints can be filed at IllinoisAttorneyGeneral.gov.

The Interchange Fee Law That Hasn't Taken Effect

As written, the IFPA would bar card networks and processors from charging interchange fees on the sales tax, excise tax, and gratuity portions of transactions. But it has never taken effect: the effective date has been pushed to July 1, 2027, and a June 2026 federal court injunction permanently blocks enforcement against national banks, federal savings associations, out-of-state banks, and card networks — leaving only Illinois-chartered banks and credit unions subject, with appeals continuing.

Example Impact:

Today: A $95 meal with $15 tax and $10 tip ($120 total) incurs interchange fees on the full $120
If the IFPA takes effect (July 2027 at the earliest): interchange fees would apply only to the $95 meal portion

While this law faces legal challenges from banking industry groups, it represents a significant potential cost reduction for Illinois businesses processing high volumes of transactions with taxes and tips.