Kentucky Credit Card Surcharge Laws

Quick Summary:

• Credit card surcharging is legal in Kentucky with proper disclosure requirements
• Maximum surcharge is 3% or actual processing costs, whichever is lower
• Merchants must provide clear notice at point of sale and business entrances
• Debit card surcharging remains prohibited under federal law
• Businesses cannot profit from surcharges, only recover processing costs

Kentucky allows businesses to pass credit card processing costs to customers through surcharging, but with specific limitations designed to protect consumers. The state caps surcharges at 3% of the transaction amount or the merchant's actual processing costs, whichever is lower. This makes Kentucky more restrictive than federal guidelines, which allow up to 4% surcharges.

The Kentucky approach balances business needs with consumer protection by requiring transparent disclosure while preventing merchants from using surcharges as profit centers. Businesses must clearly communicate these fees to customers before transactions occur, and violations can result in enforcement actions under the Kentucky Consumer Protection Act.

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 compliance requirements vary by business type.

Is Credit Card Surcharging Legal in Kentucky?

Yes, credit card surcharging is legal in Kentucky with proper disclosure and adherence to state-specific limitations. Kentucky permits businesses to add surcharges to credit card transactions, but unlike many states that simply defer to federal maximums, Kentucky has established its own more restrictive framework.

Kentucky's surcharging regulations require businesses to meet several key requirements before implementing credit card fees. The state emphasizes transparency and consumer protection through mandatory disclosure requirements that go beyond basic federal guidelines.

Under Kentucky law, businesses must ensure surcharges don't exceed either 3% of the transaction amount or their actual interchange processing costs, whichever is lower. This dual limitation prevents both excessive fees and profiteering from surcharge programs.

What's Allowed

Kentucky businesses can implement surcharging under these conditions:

• Charge up to 3% or actual processing costs - must use the lower of these two amounts
• Post clear notices at business entrances and on websites for online transactions
• Display surcharge information at point of sale before customers complete transactions
• Apply surcharges to credit cards only - excludes debit cards, cash, and check payments
• Show surcharge amounts on receipts as separate line items for transparency
• Use percentage-based fees rather than flat dollar amounts per transaction

What's Not Allowed

Kentucky law and federal regulations prohibit these practices:

• Exceeding 3% surcharge cap even if actual processing costs are higher
• Surcharging debit cards - prohibited under federal Durbin Amendment
• Profiting from surcharges - fees must only recover actual processing costs
• Hidden or undisclosed fees - notice required before transaction completion
• Inconsistent application between different credit card brands
• Flat dollar surcharges - must be calculated as percentage of transaction amount

Penalty For Non-Compliance

Kentucky enforces surcharging compliance through multiple mechanisms:

• Kentucky Consumer Protection Act violations can result in civil penalties and injunctive relief
• Consumer complaints processed through the Kentucky Attorney General's Office of Consumer Protection
• Card network penalties for violations of Visa, Mastercard, or other brand rules
• Private lawsuits under state consumer protection statutes

Kentucky consumers experiencing improper surcharging can file complaints by calling the Attorney General's consumer protection line at 1-888-432-9257 (option 3) or through the online complaint portal. The Attorney General's office investigates deceptive business practices and can seek restitution for affected consumers.

Is Debit Card Surcharging Legal in Kentucky?

No, debit card surcharging is illegal in Kentucky and all other U.S. states under federal law. The Durbin Amendment to the Dodd-Frank Act specifically prohibits merchants from imposing surcharges on debit card transactions, regardless of how they're processed.

This federal prohibition applies to all debit card transaction types:

• PIN debit transactions - traditional debit with personal identification number
• Signature debit transactions - debit cards processed through credit card networks
• Prepaid debit cards - generally prohibited from surcharging under federal rules

The reasoning behind this federal ban stems from significantly lower interchange fees on debit transactions. Federal law caps debit interchange fees at 0.05% plus $0.21 per transaction for large card issuers, making debit processing much less expensive than credit card processing.

Kentucky businesses must ensure their payment processing systems properly identify debit cards and exclude them from any surcharging programs to maintain compliance with federal regulations. Violations can result in federal enforcement actions and card network penalties.

Types of Businesses That Must Follow Kentucky's Surcharge Laws

Kentucky's surcharging regulations apply broadly to any business accepting credit card payments within the state. The law doesn't exempt specific industries or business types, making compliance essential for all merchants implementing surcharge programs.

Businesses subject to Kentucky surcharge rules include:

• Retail establishments - both brick-and-mortar stores and online retailers
• Professional services - attorneys, accountants, consultants, and medical practices
• Restaurants and hospitality - including bars, hotels, and catering services
• Contractors and trades - construction, plumbing, electrical, and similar services
• Government entities - when accepting credit cards for fees, fines, or services

The broad application ensures consistent consumer protection across all sectors while allowing businesses flexibility in managing processing costs. However, specific industries may face additional requirements or restrictions beyond basic surcharging rules.

For example, legal professionals must also consider Kentucky Bar Association ethics rules regarding client fee arrangements, while healthcare providers must ensure surcharging policies comply with insurance reimbursement requirements and patient billing regulations.

Kentucky Credit Card Surcharge FAQs

Can Kentucky restaurants add surcharges to credit card payments for dining and takeout orders?
Yes, Kentucky restaurants can add credit card surcharges up to 3% or their actual processing costs, whichever is lower. They must post clear notices about surcharges at restaurant entrances and on menus or table displays. For online ordering systems, surcharge information must be displayed before customers enter payment details. The surcharge should appear as a separate line item on receipts.

Do Kentucky contractors need special disclosure when adding credit card fees to invoiced work?
Kentucky contractors can add surcharges to credit card payments for invoiced services, but they must disclose this policy before beginning work or when presenting invoices. The disclosure requirement applies whether payment occurs at job completion or through follow-up billing. Contractors should include surcharge policies in their service agreements and ensure invoice templates clearly show the additional fee.

What happens if a Kentucky business charges 4% surcharges based on federal law rather than Kentucky's 3% limit?
Businesses charging above Kentucky's 3% limit violate state law even if they stay within federal guidelines. Customers can file complaints with the Kentucky Attorney General's Consumer Protection Division, which can seek civil penalties and require refunds to affected consumers. Card networks may also impose additional penalties for non-compliance with state regulations.

Are there different surcharge rules for online vs. in-person transactions in Kentucky?
Kentucky applies the same 3% limit and disclosure requirements to both online and in-person transactions. For online sales, businesses must display surcharge information prominently on their websites and during the checkout process before payment submission. In-person businesses need notices at entrances and point-of-sale displays. The key requirement is ensuring customers know about surcharges before completing any transaction.

Can Kentucky gas stations display different prices for cash and credit card purchases?
Yes, Kentucky gas stations can use dual pricing to show separate cash and credit prices, or they can display credit card prices and offer cash discounts. However, any price difference reflecting credit card processing costs must stay within the 3% limit. Pricing displays must be clear and not misleading to customers about the actual amounts they'll pay for each payment method.