Why Credit Card Surcharges Are Costing Banks Transaction Flow
By Steve Cocheo, Senior Executive Editor at The Financial Brand
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Retailer surcharges for consumers paying with credit cards are leading nearly three out of five cardholders to abandon at least some purchases, according to a pair of research studies by JD Power.
“Surcharging isn’t just affecting the kind of payment people are using, but they are also affecting merchant sales,” says John Cabell, managing director of payments intelligence at JD Power.
On top of that, other research indicates that increasingly common tip screens at point of sale and on websites and mobile apps are causing some consumers to shift their business to other sellers.
Key insight: JD Power research among consumers found that abandonment is even stronger among the financially stressed.
Need to Know:
- More than a third — 35% — of small businesses surveyed by JD Power impose surcharges on credit card users. That’s up one percentage point from the firm’s 2025 merchant study. Consumers have been seeing the fees increasingly in recent years.
- The ability to assess surcharges on bank credit card transactions is controlled by Visa and Mastercard rules but also subject to state laws.
- Surcharging is broadly allowed in 34 states, according to an analysis by Allaypay. Another 13 states permit surcharging with various restrictions, such as a ceiling based on the merchant’s actual processing costs. (In some of the second group, state attempts to ban surcharges were overruled by federal courts.)
- Connecticut, Massachusetts, Maine and Puerto Rico don’t allow surcharging.
Card Surcharges Can Lead to Purchase Abandonment
Surcharges for credit card use grow increasingly common. Consumers can run into them at restaurants, the auto mechanic, a favorite hobby store. Chances are, they won’t be mentioned unless users spot them on the receipt before they sign.
JD Power’s 2026 U.S. Credit Card Satisfaction Study found that 64% of respondents have been confronted with surcharges in 2026. Across the sample, 4% always see a surcharge, 12% usually do, and 48% sometimes do.
Consumers won’t always play. The same study found that 59% of cardholders say they have abandoned a purchase in progress when they find out that the retailer imposes a surcharge for using a credit card. (Federal law prohibits putting a surcharge on debit card transactions.)
The study found that abandonment occurs more frequently among people with financial troubles. Among consumers classifying themselves as “overextended”, 69% have abandoned purchases at least sometimes, and 63% of those who are “vulnerable” have done so.
Key point: Research among retailers, released by JD Power earlier this year, corroborates the trend and shows that abandonment has become a significant factor. The firm’s 2026 U.S. Merchant Services Satisfaction Study found that 32% of retailers say their customers either occasionally or frequently cancel a purchase when a surcharge is assessed.
Read more: How to Navigate a Credit Card Market Polarized Between the Affluent and the Stressed
Where and When Surcharging and Abandonment Occur
Patterns of surcharging vary. The consumer survey found that cardholders encounter the fees most frequently for transactions in connection with gambling and sports betting, dining out, and paying for travel expenses.
The merchant study found surcharging occurs much more frequently among younger businesses and startups as well as those with annual sales of less than $250,000. Such companies don’t enjoy the negotiated interchange rates that some giant retailers can obtain. They lack the volume to lay off the cost of interchange in ways other than surcharging.
When consumers balk: Abandonment is mostly occurring during discretionary purchases, such as travel and entertainment, rather than for necessities, according to Cabell.
The bigger picture: This comes at a time when more and more ways to pay exist, from cards and buy now, pay later to cryptocurrency. Cabell says that there’s “a rising tension between business owners’ growing pressure to offer multiple payment options and their increased desire to pass processing costs onto retail customers, a shift that can negatively affect the customer experience.”
A key risk that retailers face is abandonment due to not accepting the consumer’s preferred payments type. The study found that 24% of retailers had lost a sale in the previous three months due to abandonment — up four percentage points from the previous edition of the study.
Read more: Why Card-Based BNPL Is Poised to Become the Mainstream Pay-Later Channel
To Tip or Not to Tip? A Turnoff for More Consumers
Surcharges are not the only source of abandonment. Retailers can lose sales and actually lose customers because of issues like tipping.
Here’s how this plays out.
It can be an operational issue. The JD Power merchant study report noted that 61% of retailers use one or more default screens on their point-of-sale equipment. These screens handle sub-transactions like tips, charitable donations and surcharges. Malfunctions with these screens are growing and causing transaction abandonment, according to the study.
However, frustration over “tipping culture” clash is also taking a toll, and it centers on the same screens.
Over three-quarters of U.S. adults surveyed believe tipping is out of control, according to research conducted for Oobit, a crypto card and payments platform.
Among their objections are being offered the “opportunity” to tip on purchases that formerly didn’t involve tipping. In addition, they bridle at suggested tip amounts that are more generous than anticipated.
Respondents also objected to screen flows that make it very obvious to wait staff and others that they are bypassing high suggested tips amounts for a custom tip screen, likely to opt for smaller tips.
At times, they feel blackmailed. One example is tipping on delivery services. Oobit’s study found that 73% of consumers fear that leaving a low tip or no tip could cause their order to get inferior treatment.
Key financial impact for merchants and banks: Frustrated consumers are voting with their feet and fingers. Citing “tip fatigue,” Oobit said that 37% of respondents have stopped going to a particular business because the consumers felt the merchants’ tip prompts were overly aggressive. They switch to places where they aren’t made to feel uncomfortable over tips.
A surprise: Two-thirds of the sample said that they’d rather see merchants raise their prices, in order to be able to pay staff more, and thus eliminate the need to present tip options at all.
Significantly, seven out of ten consumers said the 2025 law exempting up to $25,000 in tips from federal taxes had no influence on the size of the tips they leave.
Read next: Why Top-of-Wallet Loss, Not Account Closures, Is the Real Churn Risk
