Illinois Credit Card Surcharge Laws: What Businesses Should Know for 2025

Illinois lets businesses add surcharges to credit card transactions, but the rules are a bit tighter here than in other states. Let’s dive into what Illinois business owners need to know about surcharging in 2024—plus a look at some big changes coming up that could help cut your processing costs.

A Quick Breakdown of Illinois Surcharging Rules 

Let’s start with the basics. Illinois does allow credit card surcharges, but with a few key limits: 

1. Surcharge Cap: You can only add a surcharge of up to 1% of the transaction amount or your actual processing cost—whichever is lower. 
2. Consumer Notification: Illinois requires you to notify customers about any credit card surcharges before they complete a payment. 
3. Debit Card Rules: Adding a surcharge to debit card payments is a no-go in Illinois (and across all 50 states). 
4. New Tax and Tip Fee Rule (2025): Beginning July 1, 2025, a new Illinois law will ban card networks and processors from charging interchange fees on tax and tip portions. We’ll explain how that’ll work in just a bit! 

If you’re running a business in Illinois, understanding these guidelines is crucial to stay compliant—and to know your options for keeping credit card fees in check. 

Understanding the 1% Surcharge Cap 

Illinois has a pretty strict limit on surcharges: 1% of the transaction or your actual cost of processing the payment, whichever is lower. Sound straightforward? Let’s go over some examples to see how it plays out. 

Example 1: When Processing Costs Are Higher Than 1% 

• Transaction Amount: $50 

• Processing Cost: $1.50 (3% of the total) 

• Maximum Surcharge Allowed: $0.50 (1%) 

In this case, even though processing costs are higher than 1%, Illinois law limits the surcharge to 1%, or $0.50. 

Example 2: When Processing Costs Are Lower Than 1% 

• Transaction Amount: $100 

• Processing Cost: $0.50 (0.5% of the total) 

• Maximum Surcharge Allowed: $0.50 

Here, your cost of processing the payment is less than 1%, so the surcharge cap defaults to your processing cost of $0.50. 

For most Illinois businesses, processing costs usually exceed 1%, so you’ll likely be using the 1% cap regularly to cover a portion of your expenses. 

Transparency Is Key: Informing Customers About Surcharges 

Surcharging laws in Illinois cover all types of credit card transactions, whether in-person, online, or over the phone. To comply, businesses must notify customers before they pay if a surcharge applies to their credit card transaction. This rule falls under Illinois’s Consumer Fraud and Deceptive Business Practices Act, so it’s essential to get it right to avoid any issues. 

The good news? Clear and honest communication about surcharges can actually help build trust with customers. A simple sign at checkout or a message during online checkout should do the trick. 

Upcoming in 2025: No More Interchange Fees on Tax and Tip Portions 

On July 1, 2025, Illinois will start enforcing a groundbreaking new rule on interchange fees. The Illinois Interchange Fee Prohibition Act will prevent card networks and processors from charging interchange fees on tax and gratuity amounts. 

Here’s how this new rule might look in action: 

• Transaction Total (with tax and tip): $119.94 

• Current Interchange Fee (2.7%): $3.24 (calculated on full $119.94) 

• Interchange Fee After July 2025: Calculated on the subtotal of $95 (no tax or tip), bringing the fee down to $2.57 

For many Illinois businesses, this change could lead to substantial savings on transactions involving tax and gratuity charges—like in the restaurant or hospitality industry. 

Final Thoughts on Credit Card Surcharging in Illinois 

While Illinois allows credit card surcharges, it’s one of the strictest states in terms of limits and transparency requirements. These rules protect consumers from unexpected fees and keep surcharges reasonable for everyone involved. 

If you’re looking for guidance on staying compliant and managing your financial strategies, Kaizen CPAs + Advisors is here to help. Our team provides expert advice to streamline your financial operations, optimize tax strategies, and improve cash flow management—so you can keep your business moving forward confidently. Click the 'Let’s Chat' button to connect with us and find out if Kaizen is a good fit for your business.