Can a business charge a fee for using a credit card or a debit card instead of cash?

Texas law prohibits adding a surcharge for using a credit or debit card as payment. However, due to a recent federal lawsuit it is unclear when the Texas laws can be enforced.

The laws against surcharges for using a credit or debit card are in Chapter 604A of the Texas Business and Commerce Code:

Sec. 604A.002. IMPOSITION OF SURCHARGE FOR USE OF DEBIT OR STORED VALUE CARD. (a) In a sale of goods or services, a merchant may not impose a surcharge on a buyer who uses a debit or stored value card instead of cash, a check, credit card, or a similar means of payment. […]

Sec. 604A.0021. IMPOSITION OF SURCHARGE FOR USE OF CREDIT CARD. (a) In a sale of goods or services, a seller may not impose a surcharge on a buyer who uses a credit card for an extension of credit instead of cash, a check, or a similar means of payment. […]

Note that each statute lists some exceptions. The contract between a merchant and a credit card or payment processing company may also prohibit surcharges or fees.

Cash Discounts

Some merchants offer a discounted price for paying with cash. See the definition of "surcharge" at Section 604A.001(5) for language related to discounts for cash purchases. 

2018 Federal Lawsuit

On August 16, 2018, Judge Lee Yeakel issued an order that permanently enjoined the State of Texas from enforcing parts of the law against the merchants who had sued the Attorney General. The case is Rowell v. Paxton, 336 F. Supp. 3d 724 (2018).

• Read the court order, permanent injunction, and final judgment issued on August 16, 2018. 
• You can also find a copy of the case's docket entries on CourtListener.com or on PACER.gov.

A 2018 article aimed at landlords from the Houston Apartment Association provides context and background on the litigation.

Clarification of the Rowell v. Paxton Finding

Following the decision in Rowell v. Paxton, Attorney General Ken Paxton issued Opinion KP-0257 about the credit card surcharge law. He stated:

When a court determines that a statute is unconstitutional as applied, it normally invalidates the statute only as applied to the litigant in question and does not render the statute unenforceable with regard to other litigants or different factual circumstances. … Although a recent judicial decision held section 604A.0021 unconstitutional as applied to specific facts, it remains enforceable in some contexts.

An attorney can help you determine if this law can be enforced for a specific circumstance.

Violations

The law lists penalties for violations, but the decision in Rowell v. Paxton leaves it unclear when and whether these penalties can be imposed. As Attorney General Paxton states in Opinion KP-0257, it will depend on the specific facts at hand.

Section 604A.003 says a person who knowingly violates the law is liable for a civil penalty up to $500 per violation. This section allows the Attorney General or the prosecuting attorney in the county in which the violation occurs to file suit to recover the civil penalty. It is important to read the entire statute as there are other requirements before filing suit.

The Attorney General has a consumer complaint process that you could use to report violations. However, the Attorney General's office will not file lawsuits on behalf of an individual consumer.

Attorney General Opinions

There are two additional AG opinions that address different aspects of the law in relation to surcharges:

• Opinion No. KP-0095, a 2016 opinion on online convenience fees and third-party payment processors.
• Opinion No. KP-0257, a 2019 opinion on whether a county contracting with a private entity for the collection of money owed to the county can charge a fee to defendants.