Credit Card Surcharging - Is It The Right Choice For Your Business?

Ready to lower your credit card processing fees?Do you want to offset your credit card processing fees by adding a credit card surcharge?

It's no secret that merchants hate paying processing fees for accepting credit cards as a form of payment. And now consumers are straying away from using cash on an everyday basis and pulling out the plastic is commonplace. Between the ongoing advancements in digital payments and contactless technology and the changing behavior of consumers, we’re moving more towards a cashless society than ever before. Unfortunately, that means that merchants are paying more processing fees than ever before. 

Consumers love to use their rewards cards to maximize their miles, points or get cash back. But who is funding these rewards? Do consumers actually realize that these types of cards cost merchants more money than “regular” credit card transactions? I’m sure that many of them don’t. 

Rewards cards have flooded the market, accounting for more than 60 percent of accounts and 85 percent of transactions, according to the U.S. Consumer Financial Protection Bureau’s 2019 Consumer Credit Market Report.

And of course, as a business owner, you probably understand why. Merchants, themselves, like to use their company credit cards to manage their own finances and hopefully reap some of the business card rewards. Still, with credit use becoming the norm, merchants can end up feeling like more and more of their bottom line is going right out the window.

Merchants are looking for ways to recoup the high costs of accepting credit cards.

Rather than raising prices across the board to cover the operating costs of credit card transactions, merchants are looking for ways to share the costs with the consumers who use credit cards. Because of this, credit card surcharge programs are gaining attention from both merchants and processors alike. 

Surcharging programs are viable methods for reducing and recouping the higher costs associated with accepting credit cards. The goal here is not to be greedy but to effectively, more equally, bear the cost of accepting credit cards with the consumers who want the convenience of being able to use them.

But merchants can’t just decide to add a fee for credit card transactions. There are many rules and regulations set by the card associations that must be followed when adding a surcharge. For this reason, processors have created compliant credit Card Surcharge Programs merchants can implement to help offset processing rates. Merchants must go through a reputable Payment Processing company to make sure the regulations are being followed.

Last week’s article “Credit card surcharges: What you need to know” explained the legalities of Surcharging and broke down the rules and regulations surrounding a compliant program. Today's article is meant to help you decide if assessing a surcharge on credit card transactions is the right move for your business.

Surcharge Programs come with strict rules and regulations.

While adding a surcharge can be a practical way to offset costs, there are ramifications merchants need to consider before implementing it.Merchants are paying more processing fees than ever as consumers go cashless.

The problem is that there are a lot of rules and regulations set by the card brands that come along with credit card processing. On top of that, the rules will also vary from state to state. 

Every business is unique. And what works for one business model and their clientele may not be the best for another. Merchants need to consider the ramifications of charging customers for credit card transactions to make sure it is right for their business. 

Whether it is right for your business may depend on the state you operate in. There are currently 2 states, Connecticut and Massachusetts, and the U.S. territory of Puerto Rico that ban the use of credit card surcharges. 

But even if you live in a state where it is allowed and regulated, the processor you’re currently working with may not allow it. Merchants should keep in mind that the use of surcharging has been addressed and strictly disallowed in the terms of agreement for both PayPal and Square. So if you are using either for your payments needs, you would not be able to surcharge, anyway.

If you're considering implementing a surcharge program, there are other important considerations to make. Merchants will need to weigh the pros and cons to decide if it will actually be of benefit to the company as a whole. 

One big limitation of credit card surcharges, for instance, is that they are literally only applied to credit card use. Merchants are not allowed to add a surcharge to purchases made with gift cards or a debit card, even if it's run as a “credit”. 

Today, we’re going to help you weigh some of the main benefits and downsides of starting a credit card surcharge program. So, let’s dive in.

To Surcharge or Not To Surcharge.

It may be counter-intuitive.

First of all, it’s important to consider what type of business you have and whether the credit use outweighs debit. Businesses need to do some research to figure out just what percentage of their sales actually go to credit as opposed to other forms of payments in order to decide if surcharging would benefit them.

Even in today's market, for some businesses, debit use actually greatly outweighs credit. For example, debit card usage is still high at supermarkets, discount stores, dine-in restaurants, and pay-at-the-pump gas stations. While cash leads at coffee shops and fast-food restaurants, debit usage still outweighs credit card usage. So, if this is the case for you, the money you could recoup may not be significant enough to make a difference in your actual expenses.

Consider your total credit card sales and average ticket price.

Business owners will want to take into account the actual dollar amount of their average ticket. Surcharge practices can be sketchy for businesses that regularly sell high-ticket items. 

If it’s very small, customers may not balk at a few percent added to their bill. But if you have very large ticket items, that surcharge can end up being quite significant for the customer. And that could cause them to reconsider their purchase and possibly send them to another place of business.

It’s not likely that a customer would squawk at an extra 3% on a cup of coffee, but a $2000 dining set is another thing altogether.

Take your buyer persona into account. How will a surcharge be received?

Do credit card surcharges piss off your customers?Before adding extra fees, it might be a good idea to deeply examine your customer profile.

Studies have shown that customers have an aversion to being charged an extra fee. While it may encourage the consumer to pay with cash, it could, in turn, leave a bad taste in one’s mouth. 

When surveyed, 64.5% of people said they would NOT be willing to pay an extra fee in order to use their credit card or would not use their card if they had to. It may be a way to encourage your customer to pay with cash, but it may also upset them. 

Molly Faust, a spokeswoman for American Express, believes that a merchant’s decision to apply a surcharge is “harmful to the customer.” And that “It is not a customer-friendly practice for a merchant to first attract a customer to its store or website to shop, and then to penalize the customer for using a charge or credit card that the merchant accepts.”


Will it drive customers to your competitors?

Another thing you may want to consider: How easy is it for your customer to find what they need nearby? The larger big box department stores (think Walmart and Home Depot) have decided that they will not be adding surcharges and have gone “on record” saying that they feel it would help to drive customers away.

If it’s off putting to customers to pay a fee, and they can find that same item elsewhere relatively easily, they probably will.

Another thing to consider where customers are concerned is consumer spending habits. Studies show that people who use credit cards spend more on average than cash users. They are less worried about going over budget and are more easily tempted by spontaneous purchases.

If a large percentage of your customers use credit, and the theory is that credit card users spend more on average than those who rely on the cash on hand, then could you actually be costing yourself sales? Is that worth offsetting the cost of your fees in this way?

The last thing we want is to make our customers bitter at us. Business owners need to consider their business type as well as clientele before trying to implement any program of this type. says "The ability to impose a surcharge rather than offer a discount is important, however, because shoppers are more likely to avoid a surcharge than take advantage of a discount, even if the amount of money involved is identical

The theory is that if a merchant were allowed to add a surcharge for credit use, they would then effectively be able to convince a larger majority of their customers to pay with cash. Thereby saving them money and allowing them to keep more of their profits.  

But remember, we are becoming a largely cashless society. Many people don't even carry cash on them anymore. Given that fact, consumers don’t have a choice to pay cash to avoid the surcharge. They instead may decide not to make the purchase at all or accept the fee, whether they like it or not. 

Is a Surcharge Program right for your business?

First, we’d like to point out the obvious. If you feel that your processing fees are too high, the first place to start is with your credit card processor. A credit card surcharge program is not for offsetting rates that are already too high. It should never be a revenue source for your processor, or an excuse to charge the most. You might want to start by looking for a new processor, one who will be able to offer you an interchange-plus option, which is more affordable and more transparent. 

But we do believe that credit card surcharging will become more commonplace. As more merchants see other businesses having success with the program, it will not only become more of an accepted practice with businesses, but also more accepted by the consumers patronizing those businesses. 

At the end of the day, the biggest decision would be: Is it right for your business, and if you decide to implement the program, to what extent?

Merchants don’t have to aim for 100% free credit card processing by passing all the fees off to customers. It may behoove you to come up with a percentage that helps to offset your fees, while still making your customers happy. 

MonerePay makes credit card surcharging easy and ethical.

Choose a processor with integrity for your credit card surcharge program.

MonerePay likes to work with each individual merchant to come up with a strategy that best fits their business model and success strategy. 

As always, we will focus on offering you the most fair, transparent processing fees available for the long-term success of both your business and our business partnership. Once we have an acceptable quote for your processing rates, then we can decide on an appropriate surcharge rate together.

Your surcharge program should never be a revenue source for your processor. That is why it's important to find an acceptable rate quote first. This is not a license for the processor to charge you higher rates just because they know it will be offset by your surcharge. 

Flexibility is what merchants love about the CC Surcharge Program with MonerePay. 

One of the best things about the program is that merchants are not locked into it for any length of time. Contracts are created to define the terms of the agreed upon surcharge amount. Not to keep merchants from leaving. There are no early termination fees if a merchant needs to discontinue the surcharge program. 

The program is totally flexible, can be implemented quickly as well as halted if the merchant finds that it is not working well for the business or its customers.

We encourage merchants to revisit the surcharge numbers once they have been using the program for a few months to see how it is working for them and make adjustments accordingly. Also, merchants can choose to stop the program completely and easily switch back to regular processing. 

Once the correct details have been decided on, MonerePay will do the footwork for you. 

MonerePay makes implementing the surcharge program quick and easy for both your business and your customers. Rules, regulations and notifications will be completed during the setup of the program. Rest assured that you are represented by ETA Certified Payments Professionals who are deeply educated in the regulations surrounding the industry and dedicated to making sure you are too. 

Automation adds to the simplicity of the program, allowing you to forget about figuring out calculations. You can simply focus on your customers' needs and create a hassle free transaction process. 

Merchants will be sent a pre-programmed terminal (or we will update your current terminal) with the required information to remain compliant. EMV compatible terminals that accept all types of credit cards, accept on-screen signature capture, and are PCI-DSS compliant are programmed to include the proper fields to make the transaction friction-less while still hitting all compliance procedures.

And once your program is approved and all requirements have been completed, you'll be furnished with all appropriate signage.  

Merchants can sometimes be a bit skeptical that this is a legal and compliant solution. But as the card associations continue to raise processing fees, we’re seeing more references to surcharging programs in the daily payments news. This is not only viable, but a fair way to manage costs and help to keep costs down for all of their customers.

In order to make sure you are abiding by all guidelines and regulations, make sure you call us immediately and do not try to just start to implement this yourself. If you’re caught adding a surcharge without a compliant program and properly notifying the card brands, you risk having your merchant account shut down.

At MonerePay, we care about your success. We pride ourselves on being a trusted resource for honest, transparent and affordable merchant services. We’re happy to discuss the cost of your credit card processing and whether you could benefit from our surcharge program. 

Call us today, and let our successful, long-term business relationship begin.

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