The bill, which passed unanimously and now goes to the governor, means card firms like MasterCard and Visa can no longer fine merchants for setting minimum amounts.

It also stops them fining shops for encouraging customers to use cards that have lower interchange fees and offering discounts for cash purchases.

The credit card companies face $10,000 fines for violations of the bill, some parts of which will go into effect in July if signed off.

Vermont Senate president Peter Shumlin says: "Almost every Vermont family and store owner has a story to tell about one of the major credit card companies charging them exorbitant and unfair fees or leveraging unjust fines. This legislation will help the Vermont consumer and store owner by prohibiting these abusive practices."

A MasterCard spokesman told AP that the bill would restrict consumer choice and might force people to spend more than they want.

If the legislation is passed, Vermont will be the first state to have such rules. In February national lawmakers decided to delay plans to reform credit card interchange legislation until beyond 2010, prolonging the already lengthy battle between merchants and the card firms.

The bill also set new rules outlawing the possession of credit card skimmers and re-encoding devices with offenders facing a maximum ten-years in jail or $10,000 fine.