If you’re a business that processes credit card payments for any funds received, you know about the small fees associated with this process. And while most businesses simply factor these expenses into their bottom line as part of the cost of doing business, there are some that look to offset this cost onto their customers using what’s called a surcharge.

At Merchant Card Advisors, we can offer tips on all credit card payment areas for small businesses and many others, including whether surcharging your customers is ever a good idea. Broadly speaking, however, we generally advise against it. Let’s go over the legality of surcharging plus a similar practice used if it’s illegal, plus how these practices may impact your customers.

Surcharges and Cash Discounts

For many years, charging customers a surcharge on credit card payments was expressly illegal in most states throughout the country. In recent years, however, all but 11 states have made surcharging legal, including Georgia (there are a number of requirements involved, however, including offering other options that do not involve any kind of fee to customers and spelling out any fees in broad, obvious ways).

Even in states where surcharging remains illegal, however, some companies have found ways around this. This is usually in the form of a cash or debit card discount, where a certain price is given for paying with these forms of payment that’s slightly cheaper than paying with a credit card (that price effectively builds in fees).

But as you’ll see in our next section, regardless of what you call this or how you operate it, it’s not something we advise. Customers do not like this practice, and many processors like us have specific rules against it or significant penalties for it.

Impact on Customers

When you think about it, surcharging customers is, from the customer’s point-of-view only, the same as simply raising your prices – they pay more for the same services or products. But think about the way these two opposing actions might actually look if you were in a customer’s shoes.

Say your loyal customers notice you’ve raised your prices on a common service or product. Sure, some of them may be upset by this, and a few may even go to your competitors as a result.

Many, however, will understand that this is part of staying competitive in your industry, especially if you explain as much in your promotional materials.

Now, think about that same group of customers in a different scenario: They see and expect the same pricing levels as always, but when it comes time to check out and pay, their number goes up due to being surcharged. Wouldn’t you as a customer be far more upset at the latter scenario than the former? Simply put, while you may indeed make up the small percentage points of profit you lose to credit card processing fees through surcharging, the chances of you giving back those gains and much more through the loss of customers and your reputation is very high.

For more on surcharging or other areas of credit card processing, or to find out about any of our business credit card processing services, speak to the pros at Merchant Card Advisors today.