Who pays when a card processor advertises zero fees?

Summary

Either you or your customer. Square's no-subscription plan is literally named Square Free, and it still charges 2.6% + 15¢ every time a card is tapped, dipped, or swiped. The other kind of "free" is a surcharge or cash-discount program, where the customer who pays by credit card covers the fee, and Visa, Mastercard, and several states put limits on how that works.

The plan called Free

Square's pricing page opens with "starting at $0," and its fee FAQ says Square Free has no monthly subscription cost. You pay processing fees only when you take a payment. Those fees are 2.6% + 15¢ in person, 3.3% + 30¢ online or by invoice, and 3.5% + 15¢ for keyed-in cards or cards on file. What is free is the subscription. Every sale still costs the shop money.

Surcharges: credit cards only, and a cap

A surcharge adds a fee when the customer pays with a credit card. Both Visa and Mastercard allow it in the U.S., and both forbid it on debit and prepaid cards. Visa's merchant Q&A adds a detail that trips people up: a Visa debit card is still a debit card when the customer presses "credit" on the terminal.

Visa caps the surcharge at your merchant discount rate for that credit card or 3%, whichever is lower. You must notify your acquirer at least 30 days before you start, post notices at the store entrance and at checkout (online too), and show the surcharge on every receipt. The amount also has to travel in a dedicated field of the transaction message, Field 28. Visa says an acquirer whose merchant surcharges improperly may be fined $1,000 on the spot.

Mastercard allows surcharging on its credit cards at the brand level or on one credit product. At the brand level, the cap is the lower of your average effective merchant discount rate for Mastercard credit or 4%. Notice goes to both Mastercard and your acquirer at least 30 days ahead, and the receipt has to show the dollar amount of the surcharge.

Put the two caps side by side and a flat surcharge becomes a problem:

Cash discounts start from the card price

Visa treats a cash discount as a discount offer, which it permits. The shelf price has to be the card price, either alone or next to the cash price for each item. The card total must equal the sum of the posted prices. If the card total is reached by adding a fee for paying by card, Visa may treat it as a surcharge and apply the surcharge rules.

State law comes first

Mastercard's page says its rules do not change a merchant's duty to follow state or federal law, including state laws that prohibit or restrict surcharging. Visa goes further and names states. As of February 15, 2024, Visa understood that Connecticut, Maine, Massachusetts, Oklahoma, and Puerto Rico prohibit surcharging, and that Colorado, Minnesota, New Jersey, and New York have requirements for it. Visa warns that its list may contain errors or omissions. A business with stores in several states follows the law of the state each store is in.

The FTC fee rule covers tickets and lodging

The FTC's Rule on Unfair or Deceptive Fees took effect May 12, 2025. It covers live-event tickets and short-term lodging, not retail in general. Inside those two sectors, a card fee that customers cannot avoid is a mandatory fee and belongs in the total price. The FTC's own example is a comedy club box office that charges 3% on credit cards but nothing for a payment app, debit card, or cash. There the card fee is optional, so it can stay out of the advertised total, though it still has to be disclosed before payment. The FTC calls the FAQ its staff's view of the rule, not binding on the Commission.

Sources

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Written by Kaz (pen name). Figures are copied from providers' published pricing pages on the dates shown. We have not used these products. Corrections: contact form.