Illinois Credit Card Surcharge Laws

Quick Summary:

• Credit card surcharging is fully legal in Illinois with no state-specific restrictions
• Federal 4% maximum applies, with card networks typically limiting to 3%
• Groundbreaking Interchange Fee Prohibition Act takes effect July 1, 2025, banning interchange fees on taxes and tips
• Businesses must provide clear notice to consumers before charging surcharges
• Previous attempt to cap surcharges at 1% (HB 3128) failed to pass in 2021

Illinois takes a balanced approach to credit card surcharging, allowing businesses to offset processing costs while maintaining consumer protection requirements. The state recently made national headlines by passing the first-of-its-kind Interchange Fee Prohibition Act, which will save businesses money on the tax and tip portions of transactions starting in July 2025. For companies working with Nickel, this progressive regulatory environment supports business flexibility while protecting consumers from unexpected fees.

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.

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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.

Illinois merchants can implement surcharges up to the federal 4% maximum, though card networks like Visa typically limit surcharges to 3% per transaction. 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 will become the first state in the nation to prohibit interchange fees on taxes and tips starting July 1, 2025, demonstrating a commitment to reducing payment processing costs for businesses.

What's Allowed

Illinois businesses can implement comprehensive surcharge programs including:

• Standard credit card surcharges up to 4% federally 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

Illinois businesses must avoid these prohibited practices:

• Debit card surcharges - prohibited under federal law 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 federal/network caps
• Profit-making surcharges - fees must reflect actual costs, not generate additional revenue
• Interchange fees on taxes and tips - prohibited starting July 1, 2025, under the Interchange Fee Prohibition Act

Penalty For Non-Compliance

Illinois enforces surcharge compliance through multiple mechanisms:

• Consumer fraud violations under the Illinois Consumer Fraud and Deceptive Business Practices Act
• Federal card network fines ranging from $1,000 to $1 million for violations
• Civil penalties up to $1,000 per transaction for interchange fee violations on taxes/tips after July 2025
• 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.

How Illinois's Interchange Fee Law Changes the Game

Starting July 1, 2025, Illinois will prohibit card networks and processors from charging interchange fees on sales tax, excise tax, and gratuity portions of transactions. This groundbreaking law will reduce processing costs for businesses, particularly in the restaurant and hospitality industries.

Example Impact:

• Before July 2025: A $95 meal with $15 tax and $10 tip ($120 total) incurs interchange fees on the full $120
• After July 2025: Interchange fees apply only to the $95 meal portion, saving businesses money on the $25 tax and tip amount

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.

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Illinois Credit Card Surcharge FAQs

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?
The Interchange Fee Prohibition Act primarily impacts businesses with significant tax and tip components, like restaurants and service providers. B2B transactions typically don't involve tips, but the tax savings still apply. For large invoice-based payments, Nickel's free ACH processing may still be more cost-effective than credit cards for wholesale distributors and contractors.

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?
The Illinois Interchange Fee Prohibition Act includes civil penalties of $1,000 per transaction for violations, with entities required to refund improperly collected fees. However, the law faces ongoing legal challenges from banking groups claiming federal preemption. Businesses should monitor developments and consult with payment processors about implementation timelines and compliance requirements.

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