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Surcharge Fee: Every Small Business Ticket to Profit Growth

Credit card payment is imperative for the majority of businesses today but processing credit card transactions can be costly. This is because credit card companies and payment processors are taking small percentages from sales a merchant makes. Considering that more than half of paying US citizens are using less cash today, credit card processing fees are more distressing to merchants than ever. But have you ever imagine a payment system where your business needs not to give up a certain percentage of your sales for handling credit card payments? Believe it or not, you don’t have to daydream anymore because it exists long enough that several companies have saved themselves hundreds of thousands of dollars already. This is called zero fee credit card processing or simply surcharging.

What is Surcharging?

Surcharging is the practice of transferring the credit card processing fee to the customer. That means that for customer’s every purchase, a small fee would be added on top of the item’s price. The surcharge fee, however, varies on the credit card brand, the final total of the sale, and individual merchant agreements with the credit card vendors. You might be asking if this practice is legal. Yes, it is in most US states. In fact, many merchants take advantage of the 2013 court settlement allowing credit card surcharging in the United States. As of writing, surcharging is illegal in only 8 states: Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, Oklahoma, and Texas. This payment processing fee, in some way, is an attempt to discourage credit card use.

How Do Surcharge Help Merchants Recover Credit Card Processing Fees?

Since surcharge on credit cards passes the checkout fee to the cardholder paying the goods or services, many experts deem that this is currently the only solution that helps merchants to recover credit card processing fees. Likewise, imposing a surcharge can boost a businesses’ net margin while allowing them to keep their prices relative and competitive.

Surcharging only applies to those who pay with a credit card. Payments via debit cards do not incur a surcharge fee since credit card issuers like Visa and Mastercard and banks do not burden merchants with a fee to process them. Debit card payment only incurs transaction fees during a card-is-not-present purchase, but this is not still considered as a surcharge fee.  Consumers who pay with cash also do not pay this fee.

Applying a Surcharge Fee

You may now be keen to implement a free credit card processing strategy. No wonder why! Apart from serving, there’s no denying that one of the primary goals of all businesses is profit development. And surcharging might be just the ticket for your profit to grow. However, surcharging is a highly regulated business practice. A company must strictly conform to stringent credit company rules and state law before it can apply a surcharge fee. Thus, no business should make a do-it-yourself attempt at this. Any misstep or miscalculations of the fee can incur fines, or worse, loss of the ability to accept credit card payments altogether.

Considering the intricacies and stresses of calculating surcharge fees may impact business owners, CloudBanking developed the Retail Surcharge subscription. This service is a completely risk-free and compliant surcharging solution for businesses and merchants. If you want to know more about the surcharge fee and how it can benefit your company, our team is ready to answer any questions you may have. Feel free to contact us.


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