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

What are the laws on credit card surcharges in Texas?

Two sections in the Texas Business & Commerce Code prohibit a seller from charging a fee when a buyer uses a credit or debit card as payment. These laws are in Sections 604A.0021 and 604A.002, respectively.

Each statute provides exceptions for state and local government entities and private schools in certain circumstances; read each statute for more details on these exceptions.

It is unclear if the Texas law against credit card fees is enforceable due to a federal lawsuit.

What about cash discounts?

Some merchants offer a discounted price for paying with cash. Cash discounts are not considered to be surcharges according to the definition of "surcharge" in Section 604A.001(5).

What did the federal lawsuit do?

In 2018, the United States District Court for the Western District of Texas ruled that the Texas law on credit card surcharges is unconstitutional. Judge Lee Yeakel issued an order that permanently enjoined the State of Texas from enforcing parts of the credit card surcharge law.

The case is Rowell v. Paxton, 336 F. Supp. 3d 724 (2018).This court case only addressed Texas's law on credit card surcharges, not debit cards.

For more information on Rowell v. Paxton:

• Read the court order, permanent injunction, and final judgment.
• Find a copy of the case's docket entries on CourtListener.com or on PACER.gov.
• This article from the Houston Apartment Association explains the law and the ruling.

Is the law still enforceable after Rowell v. Paxton?

The laws against credit card fees remain enforceable in some contexts, according to Opinion KP-0257, an Attorney General opinion from Ken Paxton:

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 in a specific circumstance. For more information on finding an attorney, please see the library's Legal Help page.

What are the penalties for violations?

There are penalties for violations listed in the statute, but it’s not clear if they can be imposed after the decision in Rowell v. Paxton.

Sec. 604A.003 says a person who knowingly violates the credit card surcharge law is liable for a civil penalty of up to $500 per violation. This section identifies two officials who can to file suit to recover the civil penalty:

• the Texas Attorney General
• the District Attorney in the county where the violation occurs.

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.

Other AG Opinions on surcharges

There are two additional Attorney General (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.

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