A topic that is resurfacing again is surcharging. Here are 6 things to consider before you surcharge credit card payments to your customers and clients.
Overall, we have to share with you that customers and clients see this as a negative. It has impacted more business owners – regardless of their industry – than you would think. At the end of the day, however, it is the business owner’s choice.
Caution: please make sure that it is allowed by law in the state, county or local municipality. Click here to find out.
If asked to evaluate a client’s business whether they should surcharge, here are the 6 most basic things to consider:
1. industry – do others in the industry also surcharge? (If so, is there a competitive advantage in marketing if you don’t?)
2. what will customers think or feel when told they will have to pay additional fees?
3. percentage of income from credit cards, checks and cash?
4. type of business and size of the business?
5. what is the profit margin?
6. how much is the credit card processing really costing?
To help put all of this in perspective. Think about this.
Consider a $2,500 sale for a specialty contractor, consultant, or furniture retailer. The fees might cost the business $50 to $60 for the transaction. Is that cost of doing business built into the margin on the product? Is it worth losing the customer if they are told they have to pay this on top of the cost of the service or product they agreed to buy? If the margin is a nominally conservative profit of 20%, is losing $500 in income worth charging a fee?
Did you know that you – as a business owner – cannot legally charge MORE than you are paying?
So, the local farmer’s market who tacks on a 4% service charge is probably in violation; but no one will turn them into the credit card company because the forty cents isn’t worth arguing over when it comes to freshly made pie. If it was a $138 additional cost on a hundreds of pies, needed for a community fundraising event, there might be some words exchanged…and a small word of advice shared that they should be a little bit more careful…no one needs a class action lawsuit.
Also, few customers today even think twice about using a credit card as payment; they don’t carry cash and they don’t use checks. How else would they pay – other than a smart phone app or device that is probably, usually, linked to a credit card?
Every business owner must take all of the expenses and the costs into consideration when establishing a payment policy. Soft costs are part of business and keeping competitive means everything – if you (still) think you should surcharge, or want to now more, let us know. If you think you are paying too much for processing…definitely reach out to us, too. We always offer a free account analysis and can possibly save you on processing expenses in 2019 without having to add the negative image of a surcharge on your invoice or receipt.