What is Surcharging?
Accepting credit card payments is one of the largest overhead expenses for many businesses.
Thankfully things have changed, and you now have the ability to implement a surcharging strategy to help alleviate this cost.
Surcharging is the practice of adding a small percentage to the original price of a product or service when a customer chooses to pays with a credit card. This fee is meant to cover the cost of the transaction charged by the credit card companies to the merchant for processing the payment.
Requirements
To surcharge, merchants have to comply with the rules and regulations required by the card brands (Visa, MasterCard, Discover, AmEx)
Such as:
- The amount of the credit card fee must not exceed 3%, and the merchant must not profit from the credit card fee.
- The credit card fee and the price of the product or service must be processed together as one transaction.
- The merchant must not apply a fee to debit cards.
When choosing to implement a surcharging strategy, it is important to work with a professional who can help navigate the complexities required, including state specific regulations which prohibit surcharging.
Benefits
- Recover processing fees
- By implementing compliant surcharging strategies, businesses can recover some or all of the costs associated with accepting credit card payments.
- Keep prices competitive
- Surcharging allows businesses to keep prices competitive by avoiding having to raise prices across the board for all customers.
- Promote alternate payment methods
- Surcharging can encourage customers to use alternative payment methods, such as ACH or debit cards, which can be less expensive for businesses to accept.
- Surcharging can encourage customers to use alternative payment methods, such as ACH or debit cards, which can be less expensive for businesses to accept.