The Pros and Cons of Credit Card Surcharging

Nobody likes to pay credit card processing fees – we get it! We talk to merchants in a variety of industries every day, and we hear several comments over and over again: confusing pricing and hidden fees are the greatest pain points our merchants struggle with. It can be tempting to pass the cost of your credit card processing fees on to your customers – but is that a good idea? Let’s take a look at some of the main pros and cons of credit card surcharging.

Pro: Bigger Margins

The obvious benefit to credit card surcharging is that you can pass your credit card processing costs along to your customers – sounds great, right? What would you be able to do with the money you currently spend on credit card processing fees every month? Many business owners see this as a great opportunity to keep a little more money in their pockets, especially when margins are tight.

Con: Can’t Surcharge Debit Cards

If you process most of your transactions via debit card, surcharging is not the answer for you. Even if you’re running debit cards “as credit,” you still can’t apply a surcharge. It’s important to take a look at the relative volumes you process in credit and debit cards before you decide if credit card surcharging is right for you.

Con: Might Be Illegal

Depending on where you live, surcharging may not be an option for your business. Currently there are nine states that ban or have restrictions on credit card surcharging: Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas (California is a gray area currently – read more about that here). If you do business in these states you will not be able to take advantage of credit card surcharging.

Con: Customer Backlash

Some customers won’t take kindly to having to pay more to use a credit card – and in today’s internet age you can bet they’ll let you and everyone else know about it. You may lose customers, even ones who have been loyal for many years, if you suddenly start penalizing them for using their preferred method of payment. Prior to initiating surcharging, take some time to talk to your customers and find out what the overall impact will be. You may end up losing more than you gain.

Wait, Seems Like There are More Cons Than Pros

Good eye. For many of our customers, the cons ultimately outweigh the pros. There’s really just one pro – cost. If your margins are really tight, every little bit helps. However, there are legal, regulatory, and customer satisfaction concerns to consider prior to deciding to adopt a credit card surcharging policy. We’ve written more about this topic here and here and encourage you to read those articles before you proceed. If you have questions, we’d love to help. Give us a call at 408-295-8360 or drop us a line on our website to get started.

PS – Check out these three simple ways to accept card not present payments – which is best for you?

PPS – Here’s our guide to becoming a recurring payments master.