How to pass on the credit card processing fee to the customer?

Passing on Credit Card Processing Fees: A Legal and Consumer-Friendly Approach

Businesses often incur credit card processing fees when accepting plastic payments. These fees can add up, impacting profit margins. To mitigate this, businesses can legally pass on these costs to customers through two methods: surcharging and cash discounts.

Surcharging

Surcharging involves adding a percentage-based fee to customer invoices for credit card transactions. The percentage should be equal to the business’s actual processing cost. This method is transparent and allows customers to make an informed choice between paying the surcharge or using cash or debit.

Cash Discounts

Cash discounts provide a reduction in the total invoice amount for customers who pay with cash or debit. The amount of the discount should match the credit card processing fee. This option encourages customers to use alternative payment methods and reduces the business’s overall processing costs.

Ensuring Consumer Friendliness

When implementing these methods, businesses must adhere to consumer protection laws and ensure transparency. Here are some best practices:

• Provide Clear Notice: Display signs and inform customers at the point of sale that credit card payments may incur a fee or discount.
• Set Reasonable Fees: The surcharge or discount should be equivalent to the actual processing cost. Excessive fees may be seen as deceptive.
• Offer Alternative Payment Options: Ensure customers have access to cash, debit, and other fee-free payment methods.
• Be Consistent: Apply the fee or discount uniformly to all credit card transactions.
• Follow State Laws: Some states may have specific regulations regarding surcharging or cash discounts. Be sure to follow local laws.

Benefits of Passing on Credit Card Fees

• Recover Processing Costs: Businesses can recoup the expenses associated with accepting credit cards.
• Improve Profit Margins: By shifting the cost to customers, businesses can maintain their profit margins.
• Encourage Alternative Payment Methods: Surcharges or cash discounts can promote the use of cash and debit, reducing overall processing fees.
• Stay Competitive: Many businesses pass on credit card fees to remain competitive.

Conclusion

Passing on credit card processing fees through surcharging or cash discounts is a legal and consumer-friendly way for businesses to recover costs. By adhering to best practices and providing transparency, businesses can implement these methods without creating friction with customers.