GS interviews Adam Gray, CTO of Stax Payments

Surcharging—once a niche, often-misunderstood practice—is moving steadily into the mainstream, offering merchants a way to offset rising payment processing costs. But it’s not as simple as flipping a switch. From card brand caps and state-by-state rules to customer perceptions, the road to a compliant, customer-friendly surcharge program can be full of pitfalls. In this Q&A, Adam Gray, chief transformation officer at Stax Payments, shares insights on separating myth from fact, tailoring programs to a business’s unique needs, and leveraging technology to make compliance transparent and effortless.

1. What are some common misconceptions merchants have about “free credit card processing,” and how can those misunderstandings impact compliance or customer trust?

A common misconception among merchants is that “free credit card processing” eliminates all costs. In reality, these programs, whether surcharging or cash discounting, shift the cost burden from merchant to consumer. When this is not implemented transparently, it creates compliance issues with card brands and state laws, while also risking erosion of customer loyalty. Merchants often unknowingly exceed cap limits or fail to disclose fees adequately, resulting in penalties or chargebacks. Focusing on education and compliance-first technology is key to ensuring that when merchants pursue cost-saving strategies, they do so responsibly and with confidence.   

2. As surcharging becomes more mainstream, what are the key legal and card brand requirements that merchants must navigate to stay compliant?

Compliance starts with awareness. Many merchants don’t realize that both card brands and state legislation regulate surcharges. For example, Mastercard and Visa limit surcharge amounts and require specific disclosures at the point of purchase. In addition, 10 U.S. states have varying restrictions or bans on surcharging. Merchants must also provide advance notice to card brands before surcharging.

Failing to follow these steps can result in penalties, chargebacks or reputation damage, so treating compliance as a core business strategy and not just a checkbox is essential.  We expect more state and local review of Surcharging as it enters the mainstream so it will be critical to select a payment provider that offers technology that seamlessly applies changes to the impacted markets.

3. How can merchants evaluate whether a surcharge or cash discount program makes financial sense for their specific business model and customer base?

This won’t be a one-size-fits-all solution. Businesses should assess their transaction volume, average ticket size and customer behavior. For example, in industries with thinner margins like field services, surcharging is a strategic way to preserve profitability. But in high-touch or more competitive markets, passing fees to customers may deter repeat business. At Stax, we help merchants run financial impact analysis and even offer hybrid programs so they can tailor their approach by channel, geography or customer segment. 

4. What role does technology play in ensuring that surcharging programs are implemented accurately and transparently across in-person and online transactions?

As surcharging becomes more common, it’s the underlying technology that often determines whether the program will be effective or if it will be exposed to risk. Managing surcharge rules in real-time across card brands, geographies and sales channels is not something that can be handled manually at scale. The key is automation with accountability: technology must dynamically calculate allowable fees, apply the correct disclosures, and ensure consistency across checkout experiences. At its best, it makes compliance the default, not a reactive fix.

5. Looking ahead, the next wave of innovation will center on tying surcharge logic to customer insights and using data to balance revenue protection with shopper satisfaction.  How are consumers responding to the growing use of surcharges, and what strategies can help merchants avoid alienating price-sensitive shoppers?

The general consumer response has been mixed – while many shoppers have paid surcharges, 68 percent say they would avoid using their credit card at merchants that charge an extra fee. Transparency is the key to acceptance. When customers understand why a fee exists and know they can avoid it with an alternative payment method, they will be more forgiving. That’s why we advise merchants to offer choices like ACH or debit, and to communicate value beyond the transaction. 

6. With embedded finance gaining traction, how might these tools help small businesses streamline payment processing while managing costs more effectively than surcharging alone?

Embedded finance is reshaping how small businesses think about payments. Rather than shifting costs to consumers, they can integrate payments into their software workflows to drive efficiency and new revenue. For example, with embedded invoicing, recurring billing, or automated reconciliation, merchants can save time and reduce failed payments. One thing that we have built at Stax is an infrastructure where embedded payments and finance work together, empowering small businesses to grow, not just survive. 

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