Nothing is 'illegal' - the customer isnt being force to buy if they don't want to...though it could be illegal at a restaurant when its added to the bill after you have already eaten...but they get round that by calling it a 'service tip' lol...
What is wrong is its a bit underhand...Its a credit card fee, but you can only pay by credit card....so why not just put all your prices up by 3%.........? We know why...
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