To Surcharge Card Processing Fees or Not?

Ginger HollowellCredit Card Processing/ Merchant ServicesLeave a Comment

Visa and MasterCard now allow surcharging. This means you can pass the cost of the card processing to the customer. The rules are that you have to register with Visa and MasterCard, and that you can only charge the average of the credit card processing fees and not more than 4%, even if your actual rates are higher than that. Also, you must post a notice on your website, and at your brick and mortar. One catch is that you are not allowed to surcharge debit cards.

Is it a good idea to surcharge? Answer, Yes and No. Surely you can re-coop some overhead costs of taking cards for payment. The question is whether your customers will give you any pushback, or simply call a competitor who does not chargeback. This would be the risk you decided to take, and I would recommend that you track your sales during a test period to see how it is received. Another way to skin the same cat would be to simply raise your prices by the same amount as the surcharge. This way the added cost is not so visible to the customer.

Some processors are spending a lot of effort on their new pitch for surcharging. The pitch goes like this: We can show you how to get all your processing fees for FREE. Simply start using our surcharging too. The program allows you to surcharge 4%, and we only charge you $75/month for this tool.

Now let’s analyze this pitch. The processor is going to write you up with card processing fees of 4%, which is way higher than most people pay. But since all the cards will be charged at 4%, the merchant’s average card processing fee is 4%, so they technically fall inside the rules. The $75 monthly for the “tool” to surcharge equates to even more profits for the processor. This is a profitable, but sneaky way for processors to make a whole lot of money off card processing! But the question remains whether the merchant will make more profit to his bottom line, or will he/she actually lower their profits because of lost customers. Should the merchant decide to stop surcharging, he or she is most likely stuck in a contract with a huge termination fee, and in turn, are stuck paying very high rates for their merchant services until the contract runs out.

Electronic Money Company can set you up for surcharging should you so choose, but we will leave you at your current low rates that we have provided for you. You can start of stop surcharging without any monthly fees. And we do not have termination fees in our agreements because we don’t need to. Our merchants basically never leave because they are treated so well.