There was a time — not that long ago — when adding a fee to a credit card transaction was practically a cardinal sin in the payments industry. Card Associations had entire rule books dedicated to preventing it. Merchants feared losing customers over it. And the card brands themselves spent years insisting that surcharging their product amounted to brand discrimination.
That time is over. And consumers act like they haven't noticed.
The Early Days: Fees as a Public-Sector Exception
For most of the first decade and a-half of the 21st century, cardholder fees — whether framed as Service Fees, Convenience Fees, or anything else — were largely confined to the public sector. Government agencies, utilities, and a handful of other specialized industries quietly charged consumers a small premium to pay by card. The justification was straightforward: these entities operated on thin budgets and in some cases weren't legally allowed to absorb the 2–3% cost of credit card acceptance, nor did they have the option that a retailer might to fold the cost into the price of the product.
But the rules governing how and when those fees could be applied were anything but straightforward. The card brands (e.g. Visa) maintained an elaborate framework for what constituted a compliant Convenience Fee or Service Fee — under what circumstances each could be assessed and how they had to be disclosed. A Convenience Fee was only permitted when the card payment represented a genuine alternative to a primary non-card payment channel. And a particularly complex rule for providers was convenience fees for card had to be matched by an equal fee for ACH/eCheck. And then came Service Fees, which have varying rules & regs for different payment markets and use-cases.
The Lawsuit That Changed Everything
The turning point had been building in the courts since 2005, when a class of U.S. retailers first filed suit against Visa, Mastercard, and more than 25 major banks. The allegation: the card networks had colluded to fix interchange fees — the "swipe fees" merchants paid every time a customer tapped a card — and had enforced rules that prevented merchants from steering customers toward cheaper payment alternatives.
After years of litigation, the case reached a watershed moment. In July 2012, Visa and Mastercard agreed to a multi-billion dollar settlement — at the time, one of the largest antitrust settlements in U.S. history. But, beyond the money, the settlement carried a structural concession that would reshape the industry: Visa would modify its rules to permit merchants to impose surcharges on credit card transactions, subject to caps and competitive parity requirements. For the first time, what the card brands had long characterized as discriminatory treatment of their product became — officially — permissible commerce.
Surcharging was now legal. But legal and widespread are not the same thing.
Slow Adoption: Fear of the Customer Walkout
Even after the legal barriers came down, most merchants were slow to pull the trigger. The prevailing fear was simple: customers would leave. Put a 2.5% surcharge on a restaurant check, and diners would go somewhere else. Add a fee to an e-commerce checkout, and abandon-cart rates would spike.
These fears were not entirely irrational. In the early years of surcharging availability, merchant experience generally confirmed some level of payment migration — customers who encountered a surcharge would frequently switch to debit, write a check, or pay cash rather than absorb the fee. And for businesses operating on thin competitive margins, even a modest reduction in transaction volume was a meaningful business risk.
Cash discounting emerged as a softer parallel approach — rather than adding a surcharge to card payments, merchants offered a small discount for cash, achieving the same economic outcome through slightly different optics. But adoption remained low across most consumer-facing industries.
Consumers were already used to paying ATM fees to access their own money — that had long since become background noise. But paying a premium to use a credit card at the checkout counter was a different psychological proposition. It hadn't normalized. Yet.
The COVID Accelerant: Fee Blindness at Scale (2020–Present)
Then came 2020.
The pandemic disrupted nearly every assumption about consumer payment behavior and, more broadly, about what fees were tolerable in everyday commerce. As physical retail contracted and digital channels exploded, consumers rapidly adapted to an ecosystem defined by convenience layered on cost. DoorDash and Instacart delivered groceries and restaurant meals to your door — and they came with delivery fees, service fees, expanded tip prompts, and in some cases, convenience surcharges stacked on top of inflated item prices. Streaming services added tiers. Ticketing platforms made their fees infamous. Airlines unbundled everything.
None of this was directly tied to credit card acceptance costs. But it conditioned consumers, at a broad psychological level, to expect that purchasing anything in a digital or hybrid economy would carry fee attachments. The question shifted from "why is there a fee?" to simply "how much?"
By the time restrictions lifted and commerce re-accelerated in 2021 and 2022, the environment had shifted fundamentally. Point-of-sale terminals across the country — from coffee shops to nail salons to food trucks — were programmatically prompting customers for tips on transactions that had never carried tip expectations before. Customers largely complied. The friction had been removed; the habit had formed.
Against this backdrop, credit card surcharging stopped feeling exceptional. The numbers tell the story clearly. In 2025, according to the National Restaurant Association, 20% of restaurants were adding fees or surcharges to customer checks. Across all merchant categories, the trend is even more striking: J.D. Power's 2025 Merchant Services Satisfaction Study found that 34% of merchants are now adding surcharges for credit card purchases — up from under 5% in 2021.
The empirical impact of surcharging is different than what was expected. Research indicates that roughly 22% +/- of payers are choosing lower-cost debit or ACH options when a credit card surcharge is introduced — far less than the high abandonment rates merchants once feared. In many cases, particularly in government and bill-payment contexts, the migration is even lower. Consumers who value the rewards, protections, and financing flexibility of their credit card often absorb the surcharge and carry on.
Researchers have even given the phenomenon a name: the "lock-in effect." Consumers pay less psychological attention to surcharges than to base prices tied to the product or service. A fee tacked on at the end of a transaction is processed differently than a sticker price — and once consumers encounter surcharges regularly enough, they stop processing them as an insult and start treating them as a line item.
The real-world evidence is striking. A large government institution processing $200 million in annual card payments absorbed the full cost of credit and debit card acceptance for years. When they implemented a Service Fee program in 2023, internal projections anticipated meaningful volume erosion — perhaps 40–50% of payers switching to no cost alternatives rather than pay an additional 2.5%. What actually happened: volume barely moved. The same payers who had been using their cards for free simply kept paying, fee and all, as though nothing had changed.
The Capitol Hill Fight: A Familiar Battlefield
As surcharging proliferates, the question of who ultimately bears the cost of electronic payments has moved squarely onto the legislative agenda in Washington — and the battle lines look remarkably familiar.
The Credit Card Competition Act (CCCA), introduced by Senators Dick Durbin and Roger Marshall and reintroduced again in January 2026, would direct the Federal Reserve to ensure that large card-issuing banks offer merchants a choice of at least two networks over which a credit card transaction can be processed — breaking the effective Visa-Mastercard duopoly on credit card routing in the same way the Durbin Amendment of 2010 addressed debit cards. The bill's backers argue that competition in the routing market would drive down interchange fees, reducing the cost burden on merchants and, ultimately, on consumers.
The opposition — led by banks, card issuers, and the payment networks themselves — has dug in hard. They say lower interchange revenue would force cutbacks to credit card rewards programs, hurt smaller financial institutions that depend on interchange income, and ultimately raise costs for consumers in other ways. They point to the history of the original Durbin Amendment as evidence: when debit interchange was capped in 2011, multiple studies — including research from the University of Chicago and the Federal Reserve Bank of Richmond — found that merchants largely did not pass their savings on to consumers. Said another way, prices didn't move.
The Cardholder's Dilemma: Stuck in the Middle Either Way
Here is the uncomfortable reality that neither side of the Capitol Hill debate wants to advertise: regardless of who wins, the cardholder is likely to lose.
If the merchant lobby prevails and interchange fees are reduced through legislation, history suggests the savings will flow primarily to large retailers and their shareholders — not to consumers in the form of meaningfully lower prices. The Durbin debit experience is the case study.
If the card brands and banks prevail and keep interchange at current or elevated levels, the economics of card acceptance will continue to pressure merchants — and the response, as we've seen clearly over the last several years, will be more surcharging, more service fees, and more fee-based payment models spreading across every industry. Either way, the cardholder ends up holding the bill. They either pay through higher retail prices that never came down, or they pay through explicit fees assessed at the point of transaction. The economics are the same. Only the line item changes.
And based on the last five to six years, consumers will adapt. What starts as a novel annoyance becomes standard practice, then just the way things are.
The Card Brands' Quiet Pivot
For decades, Visa and Mastercard opposed surcharging not merely on legal grounds, but on strategic ones. The card brands' foundational value proposition to consumers — and by extension to issuing banks — rested on the promise that credit cards were universally accepted at no additional cost. Surcharging, in their view, undermined the incentive to carry and use their products. If consumers face a penalty for choosing credit, adoption would suffer, and their entire value proposition of a digital first, credit driven, economy would evaporate.
That argument has proven less durable than expected. Credit card usage has continued to grow despite the expansion of surcharging. Credit cards surpassed both cash and debit cards to become the most popular payment method by transaction count in 2022, accounting for more than 30% of all payments. By 2024, credit card usage as a share of transactions had risen further, even as surcharging became more common. The sky, it turns out, did not fall for the card brands.
What This Means Going Forward
The normalization of cardholder fees represents something more significant than a pricing shift. It is a structural reconfiguration of who pays for what.
For most of the history of card acceptance, the cost of processing was borne by merchants and, indirectly, embedded in the prices of goods and services. A consumer who paid cash and a consumer who paid by credit card paid the same price at the register — but the credit card consumer was effectively being subsidized by the cash consumer, who absorbed the merchant's blended cost of acceptance without receiving the card's rewards.
That model is shifting. Increasingly, the cost of card acceptance is being made visible and passed directly to the cardholder. In many ways, this is a more economically honest arrangement. But it also means that the full cost of the digital payments ecosystem — interchange fees, assessment fees, auth/settlement fees, and now platform fees charged by merchant-of-record intermediaries — is becoming a line item in consumers' everyday spending.
We are, in a sense, coming to the end of the illusion that paying electronically is free. It never was. It just wasn't on the receipt.
Have thoughts about surcharging and the new payer's numbness to the added cost layer? We'd love to hear it!