South Dakota Credit Card Surcharge Laws

Quick Summary:

• Credit card surcharging is legal with specific restrictions
• Surcharges cannot exceed merchant's actual cost to accept cards (up to 4% maximum)
• Must clearly disclose surcharge at store entrance, point of sale, and websites
• Applies only to credit cards - debit and prepaid cards are excluded
• Dollar amount must be displayed on transaction receipts
• Follows 2013 court settlement allowing merchants to pass processing costs to customers

South Dakota allows credit card surcharging but with important restrictions that set it apart from many other states. While the Mount Rushmore State permits merchants to pass credit card processing costs to customers, businesses cannot exceed their actual cost of acceptance, even if federal law would allow higher fees. This consumer-focused approach ensures that surcharges recover legitimate processing expenses rather than generate additional profit.

For South Dakota businesses handling large invoice-based payments, particularly contractors, agricultural suppliers, and wholesalers, these rules provide a clear framework for managing credit card costs while protecting customer relationships through transparent pricing requirements.

Legal Disclaimer: This information is for reference only and does not constitute legal advice. Consult with an attorney before implementing surcharge programs, as regulations can change and individual circumstances may vary.

Is Credit Card Surcharging Legal in South Dakota?

Yes, credit card surcharging is legal in South Dakota under specific conditions that prioritize consumer protection. Following a 2013 court settlement between retailers and the credit card industry, South Dakota allows merchants to pass processing costs to customers, but with stricter limitations than federal law requires.

The key restriction is that surcharges cannot exceed the merchant's actual cost to accept credit cards, even if that cost is below the federal 4% maximum. The South Dakota Attorney General's Consumer Protection Division explicitly states that surcharges must reflect actual processing costs, which typically range between 1.5% and 4% of the transaction amount.

What's Allowed

South Dakota businesses can legally implement these surcharge practices:

• Add surcharges up to merchant's actual processing cost (not to exceed 4% federal maximum)
• Charge different rates for different card types based on actual costs for each network
• Apply surcharges to commercial and consumer credit card transactions
• Display surcharge information at store entrances and point of sale
• Include surcharge disclosure on website homepages for online businesses
• Show dollar amount of surcharge on receipts for transparency

What's Not Allowed

South Dakota law and federal regulations prohibit these practices:

• Surcharging debit cards or prepaid cards - limited to credit cards only
• Exceeding actual processing costs - cannot use surcharges to generate profit
• Charging more than 4% even if processing costs somehow exceed this amount
• Failing to provide clear disclosure at required locations (entrance, point of sale, website)
• Omitting surcharge amount from receipts - dollar amount must be itemized
• Applying surcharges without proper signage at physical business locations

Penalty For Non-Compliance

South Dakota enforces surcharge violations through multiple channels:

• Consumer complaints filed with the South Dakota Attorney General's Consumer Protection Division
• State investigation and enforcement for violations of consumer protection laws
• Federal enforcement under truth-in-advertising regulations
• Card network penalties including fines up to $25,000 for repeat violations
• Private consumer lawsuits for deceptive business practices

The South Dakota Consumer Protection Division actively monitors compliance and provides guidance to businesses on proper surcharge implementation, emphasizing the requirement that fees cannot exceed actual processing costs.

Surcharging vs. Cash Discounts in South Dakota

South Dakota businesses have flexibility in how they structure pricing around payment methods. While traditional surcharging adds fees to credit card transactions, cash discount programs offer an alternative approach that may be more customer-friendly.

Under a cash discount model, South Dakota merchants can display their credit card prices as the standard rate while offering discounts for customers who pay with cash, check, or ACH. This approach often receives better customer reception since people perceive they're receiving a benefit rather than paying a penalty.

However, businesses must ensure their cash discount programs comply with the same transparency requirements as surcharging. The actual economic effect is identical - credit card users pay more than cash users - but the psychological impact differs significantly. Many South Dakota agricultural suppliers and contractors find cash discount programs particularly effective for large transactions where the savings can be substantial.

Both approaches must still comply with South Dakota's core requirement that the differential cannot exceed the merchant's actual cost to process credit card payments.

South Dakota Credit Card Surcharge FAQs

Do South Dakota agricultural suppliers need special disclosure for equipment purchases over $50,000?

South Dakota's disclosure requirements apply to all transaction sizes. Agricultural equipment dealers must display surcharge notices at their showrooms and include dollar amounts on receipts regardless of purchase size. However, the restriction that surcharges cannot exceed actual processing costs becomes more significant on large transactions where even a 2.5% fee represents substantial amounts.

Can South Dakota contractors add surcharges to progress payments on construction projects?

Yes, South Dakota allows surcharging on commercial transactions including construction progress payments. Contractors should ensure their processing costs justify the surcharge amount and provide clear disclosure in their contracts. Many contractors find success by explaining that surcharges offset credit card fees rather than increase project costs.

How do South Dakota's "actual cost" restrictions compare to neighboring states?

South Dakota is stricter than most neighbors. North Dakota, Montana, and Wyoming allow surcharging up to the federal 4% cap without requiring proof of actual costs. Minnesota has cost restrictions but with different disclosure requirements. This makes South Dakota's approach more consumer-protective but requires businesses to carefully track their processing expenses.

Can South Dakota gas stations display different cash vs credit prices at the pump?

Yes, South Dakota allows dual pricing at gas stations under the same actual cost restrictions. Gas stations typically have lower processing costs (around 2-3%) so their credit card premiums must reflect these actual costs rather than the maximum allowed amounts. The pricing must be clearly displayed with equal prominence.

What documentation should South Dakota businesses keep to prove actual processing costs?

Businesses should maintain detailed records of their merchant processing statements showing interchange fees, assessment fees, and processor markups for each card type. This documentation becomes crucial if the South Dakota Consumer Protection Division investigates complaints about excessive surcharges. Many businesses work with their processors to calculate blended rates for different card categories.

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