If we are being capped at 3% for our customers, then why are we being charged 3.5%?

I believe this is regulated by your state. Here is what I found on google "Credit card surcharges are typically maxed at 3% of the purchase price. Across most of the United States, credit card surcharges cannot exceed 3%. The surcharge rate is capped at 4% (3% for Visa) of the total transaction."

yes why is that?