Surcharge Caps in Oklahoma and the Benefits of Dual Pricing: Pros and Cons for Merchants

Introduction

As interchange fees continue to rise, merchants across the U.S. are under increasing pressure to protect their margins while remaining compliant with complex payment regulations. For many years, one of the most common ways to offset credit card processing costs has been surcharging — adding a small percentage fee when customers pay with credit cards.

But recently, states like Oklahoma have implemented surcharge caps, restricting how much merchants can charge. These changes have forced business owners to rethink their strategies, especially in industries already operating with thin margins.

An increasingly popular alternative is dual pricing, which shows customers two prices upfront: a lower cash price and a higher card price. Unlike surcharging, dual pricing is legal in all 50 states and gives merchants more flexibility.

So which model is better for merchants? Let’s break down the pros and cons of surcharging versus dual pricing, and why many Oklahoma businesses — and merchants nationwide — are leaning toward dual pricing as a long-term solution.

Surcharging: Pros and Cons

What It Is

Surcharging means adding a fee (usually a percentage) to the customer’s total when they choose to pay with a credit card. For example, if a store adds a 3% surcharge, a $100 purchase would cost the customer $103 when paid by card.

Surcharging is designed to offset merchant costs by passing processing fees directly to the consumer.

Pros of Surcharging

1. Direct Cost Recovery: Merchants pass credit card fees to customers who use credit, reducing the business’s processing expense.

   
   

2. Quick to Implement: Many payment processors, POS systems, and gateways already support surcharging add-ons, making it easy to enable.

   
   

3. Encourages Lower-Cost Payments: By charging extra for credit, customers may opt for debit, ACH, or cash — all lower-cost payment methods.

   
   

4. Short-Term Relief: For merchants facing sudden fee increases, surcharging provides a fast way to stabilize margins without major operational changes.

   
   

Cons of Surcharging

1. Capped Amounts: Visa and Mastercard rules cap surcharges (generally at 3%–4%), and now Oklahoma law enforces its own caps. If your costs exceed those thresholds — common in high-risk industries — you’re still absorbing part of the fee.

   
   

2. Not Nationwide: Several states (including Colorado, Maine, Connecticut, and Massachusetts) either restrict or heavily regulate surcharges. Merchants with multi-state operations face compliance headaches.

   
   

3. Negative Customer Perception: Customers often see surcharges as “penalties.” Instead of understanding that fees come from card brands, they may blame the merchant and avoid repeat business.

   
   

4. Compliance Burden: Surcharging requires detailed disclosures at checkout, receipt-level transparency, and strict application only to credit (not debit or prepaid). Failing to comply risks card network fines or state penalties.

   
   

5. Processor Dependence: Not all processors allow surcharging, especially for high-risk categories like smoke shops, CBD, and nutraceuticals. This leaves merchants with fewer options.

   
   

Dual Pricing: Pros and Cons

What It Is

Dual pricing offers customers two visible prices upfront:

• A cash price (lower).

• A card price (slightly higher, reflecting processing costs).

  
  

For example, a smoke shop might list a vape device at $95 for cash or $99 for credit. Customers see the difference and choose their payment method.

Pros of Dual Pricing

1. Allowed in All 50 States: Because dual pricing is structured as a discount for cash, not a surcharge for credit, it’s legal nationwide. This avoids the patchwork of surcharge restrictions.

   
   

2. Full Cost Recovery: Merchants set the credit price themselves — there’s no cap. This ensures 100% of processing costs are recovered, even in high-fee industries.

   
   

3. Customer Transparency: Dual pricing is displayed upfront on shelves, menus, or online product pages. Customers aren’t surprised at checkout.

   
   

4. Positive Framing: Shoppers perceive a “cash discount” more favorably than a “credit penalty.” This psychological advantage improves acceptance.

   
   

5. Simpler Compliance: Merchants don’t need to track surcharge caps or state-specific disclosure laws. As long as both prices are displayed consistently, dual pricing is compliant.

   
   

6. Better for High-Risk Verticals: Industries like vape, CBD, and supplements — often hit with higher processing rates — benefit most from the no-cap model of dual pricing.

   
   

Cons of Dual Pricing

1. Implementation Setup: Merchants need POS systems or ecommerce tools capable of displaying and managing dual prices. Some legacy systems may not support this out of the box.

   
   

2. Customer Education: Not all customers are familiar with dual pricing. Some may initially ask questions about why two prices are listed. Staff and signage must provide clarity.

   
   

3. Consistency Across Channels: If a brand sells both online and in-store, it must ensure prices are displayed consistently across all platforms to avoid confusion or compliance issues.

   
   

Real-World Example: Oklahoma Surcharge Caps

A chain of smoke shops in Oklahoma previously added a 4% surcharge to all credit purchases. With the state’s new surcharge cap, they could no longer fully recover their fees.

Switching to dual pricing, they:

• Showed both cash and card prices clearly on receipts and displays.

• Fully recovered processing costs without violating the new cap.

• Saw fewer customer complaints, since the difference was framed as a “discount” instead of a “penalty.”

  
  

Result: The business protected margins, improved transparency, and avoided compliance risks.

Side-by-Side Comparison

Feature	Surcharging (Capped)	Dual Pricing
Legality	Restricted in some states	Legal in all 50 states
Fee Caps	3–4% (Visa/Mastercard + Oklahoma cap)	No caps — merchant sets credit price
Customer Perception	Seen as a penalty	Seen as a discount/choice
Compliance	High burden, state rules vary	Simple: display both prices
Cost Recovery	Partial (if costs exceed cap)	Full recovery possible
Ease of Setup	Often built into gateways	Requires POS/ecommerce capable of dual pricing

Which Model Is Better for Merchants?

• Surcharging is a quick fix. It helps in states that allow it, but with rising fees and new caps (like in Oklahoma), it often falls short. Compliance complexity and customer pushback add to the downside.

• Dual Pricing is a sustainable strategy. It works nationwide, recovers 100% of fees, and improves customer perception. For merchants in high-risk industries — or anyone facing capped surcharges — dual pricing is the smarter long-term option.

  
  

Conclusion

Oklahoma’s new surcharge caps highlight the tightening regulatory environment around surcharging. While surcharges still provide some relief, they’re capped, complex, and often unpopular with customers.

Dual pricing, on the other hand, provides merchants with a transparent, compliant, and customer-friendly way to recover processing costs without limits. By framing the difference as a discount rather than a penalty, merchants protect their margins while keeping customers happy.

At Tailored Commerce Group, we specialize in helping merchants implement dual pricing programs, compliant surcharging strategies, and advanced payment solutions. Our goal is to ensure that merchants in Oklahoma — and across the U.S. — can recover processing costs sustainably, no matter what regulations come next.