Surcharge, cash discount, or dual pricing: what California merchants can (and can't) do

If you’ve looked into passing your credit card processing costs to customers, you’ve run into three terms — surcharging, cash discounting, and dual pricing — often used as if they mean the same thing. They don’t, and in California the difference is the line between a compliant program and a legal problem. Here’s a plain-English breakdown, current as of 2026.

A quick disclaimer: this is general information, not legal advice. Surcharge rules change often and are enforced by both the state and the card networks. Confirm the current requirements for your business — or let us set it up so it’s compliant from day one.

First, the three terms — because they’re not the same

• Surcharge — you advertise one lower price, then add a fee when the customer pays by credit card.
• Cash discount — you advertise one higher price that already covers card costs, then subtract a discount for customers who pay with cash, debit, or check.
• Dual pricing — you show both prices at once: a card price and a lower cash/ACH price, side by side, on the shelf, menu, or invoice. The customer sees the full price either way and simply chooses.

The distinction matters because a surcharge adds to an advertised price, while cash discount and dual pricing show the full price up front. That’s exactly the line California drew.

What changed in California in 2024

On July 1, 2024, California’s SB 478 — the “Honest Pricing Law” (a.k.a. the Hidden Fees Statute) took effect. It bans “drip pricing”: the advertised price must include all mandatory fees, except government taxes and shipping.

The practical effect for card acceptance: a traditional credit-card surcharge is effectively off the table for most California businesses. You can’t advertise a base price and then tack on a mandatory card fee at checkout — and a disclosure sign at the register is no longer enough to make that compliant.

One big exception: restaurants. A follow-up law, SB 1524 (June 2024), lets restaurants charge service fees or credit-card convenience fees, as long as the fee is clearly disclosed on the menu alongside the food and drink prices.

So how do California merchants offset card fees now?

The compliant path is to build the cost into your pricing and reward the cheaper payment methods — using dual pricing or a cash discount:

• Dual pricing — post the card price and the lower cash/ACH price together. Nothing is “added,” so it satisfies the honest-pricing rule.
• Cash discount — post the (card-inclusive) price and give a discount for cash, debit, or check.

Either way, the customer sees the true price before they decide, which is what the law requires. This is the model we set up for California merchants, because it protects your margin on card sales without running afoul of SB 478. (See how our dual pricing works.)

The card-network rules that apply no matter what

Even where surcharging is allowed, Visa and Mastercard set rules on top of any state law — and they’re worth knowing because they shape how any fee program has to work:

• Caps: Visa limits surcharges to 3%, Mastercard to 4%, and in no case more than your actual cost of acceptance.
• Never on debit or prepaid: you cannot surcharge a debit or prepaid card — anywhere, no exceptions.
• Disclosure: signage at the entrance and the point of sale, and the fee shown as a separate line item on the receipt.
• Registration: you must notify Visa, Mastercard, Discover, and your processor at least 30 days in advance before you start.

Getting these wrong isn’t just a slap on the wrist — network fines for improper surcharging can run into the tens of thousands of dollars.

A quick compliance gut-check for California

1. Are you a restaurant? A clearly-disclosed menu convenience fee may be allowed (SB 1524). If not, avoid a straight surcharge.
2. Use dual pricing or a cash discount — show the full price; don’t add a fee to an advertised one.
3. Never apply a fee to debit or prepaid cards.
4. Post clear signage and show any price difference on the receipt.
5. If you surcharge where allowed, stay under the cap and register 30 days ahead.
6. When in doubt, confirm the current rules — they change, and enforcement is real.

The bottom line

In California, “just add a surcharge” usually isn’t the right answer anymore — but you can still stop eating your card processing costs. Done right, dual pricing shows customers a card price and a lower cash/bank price, keeps you compliant with the honest-pricing law, and protects your margin on every sale.

If you want, we’ll set it up for you — configured to follow California’s rules — and show you exactly what it looks like at your counter or on your invoices. Talk to a payments expert.

Sources

• California Attorney General — Hidden Fees / SB 478
• Visa — U.S. Merchant Surcharging Q&A; Mastercard merchant surcharge rules