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Merchant surcharges are proving problematic for card-accepting merchants, as nearly one-third of small businesses say customers walk away from a potential transaction when faced with the extra charge, according to a study released early Tuesday by J.D. Power.
Some 35% of merchants are now surcharging when customers use credit cards, according to the study, with newly formed businesses and restaurants levying the charge more often than other sellers. That result is virtually level with a similar J.D. Power report a year ago that found 34% assessing surcharges. The latest report, called the “J.D. Power 2026 U.S. Merchant Services Satisfaction Study,” took responses from 4,407 small businesses that use a variety of merchant-service providers. The survey effort took place from August through October.
Moreover, surcharges and other add-ons, such as tips and donations, can prove problematic when it’s time to pay. The study found that 61% of merchants use at least one so-called default screen on their point-of-sale equipment to prompt for these add-ons and ease the way for customers to include the extra costs. But the downside is that the prompts can lead to a rise in abandoned transactions “due to growing software and hardware issues,” according to the report, which found that the process is problem-free for just over half of customers, down from 55% a year ago.
The J.D. Power research asked for the first time with the current study whether merchants were using automated screens for surcharging—distinct from tip screens—and found that 27% were using such dedicated screens. But the screens can be problematic, says John Cabell, managing director of payments intelligence at J.D. Power. “Automated screens seem to result in more issues with hardware or software,” he tells Digital Transactions News. In general, “twenty-eight percent of customers are walking away because of problems with hardware,” he says.
Merchants apply surcharges to recover all or part of the so-called discount fee they pay to processors on each credit card transaction. Visa and Mastercard permit surcharges but impose a number of rules on the practice, including clear statements of the levy online, on receipts, and at checkout. The charges also may be applied only on credit card transactions, according to the network rules, which cap the levies at 4% or less. Surcharges must be refunded along with the underlying charge if a refund becomes necessary. Surcharges are also illegal in some states.
Beyond the surcharge issue, the latest J.D. Power report found 92% of merchants are accepting payments from digital wallets, up four points from 2024, while 58% are taking buy now, pay later payments, up from 54%. That makes BNPL the fourth-most accepted form of payment, behind cards, digital wallets, and cash. At the same time, the research found 19% of small sellers accepting cryptocurrency, a 4-point rise from a year ago.
