Credit card processing fees are expensive. There’s no way around it. In 2022, industry data shows that credit card companies earned a whopping $126.4 billion in processing fees. At upwards of 3.15% plus ten cents in interchange fees, these extra fees cost a pretty penny. And with merchants expected to pay as much as $502 million extra after price hikes in 2023 and 2024, these fees are shooting up faster than the transaction amounts spent on purchases.
While some businesses have accepted swipe fees as a way of life, small business owners may struggle with remaining profitable while also providing a range of payment options. With many consumers opting for non-cash payment methods like contactless payments, businesses often have no choice but to accept credit card payments to attract and retain customers.
Enter credit card surcharging programs, an increasingly-common method that allows merchants to not incur expensive transaction fees from credit card transactions, and to instead pass it on to the consumer. As more businesses opt for a surcharge program to manage their ballooning costs, it’s important to be aware of best practices around notifying your customers about this additional fee to not only follow all legal requirements, but also provide a seamless customer experience. In this article, we’ll cover everything you need to know about credit card surcharge signage to set you up for success.
TL;DR
- Surcharging is a way for merchants to pass on swipe/credit card fees on to their customers (which can include fees like interchange fees and assessment fees).
- It’s important to carefully communicate the reasoning behind surcharging, to help make sure your customers understand and can empathize with your decision-making process.
- Best practices for effective surcharging communication include using clear and simple language, making it visually easy to read, and ensuring total compliance with regulations.
What is Credit Card Surcharging?
While we’ve already spoken in-depth about credit card surcharging, here’s a quick TL;DR of that article. Basically, surcharging is a way for merchants to pass on swipe/credit card fees on to their customers (which can include fees like interchange fees and assessment fees).
That means if a customer wants to make a credit card purchase, they’ll be charged an additional fee to cover the payment processing costs.
Although surcharging has been widely debated, it’s starting to become something of a mainstay, especially with rising processing fees. Since Visa and Mastercard jointly control the majority of the credit card market, the relative lack of competition makes it easy for these credit card giants to set the swipe fees as they fit, which is why surcharging can be one of the fee management options utilized to recoup costs.
Best Practices When Creating Your Surcharge Sign
When deciding on what kind of wording to use, keep in mind that you need to have two signs: both a point-of-entry disclosure and a POS disclosure. The latter is a sign that’s clearly displayed when a customer enters your store, and the other is a sign next to, or near where customers checkout. For both options, you need to adhere to the following best practices.
Use clear, simple language: It’s a surcharge law that you use straightforward language, so customers can quickly understand that you’re implementing card surcharging. For example, your sign can’t say: “We hereby institute a supplemental fee, henceforth referred to as a surcharge, quantified as a percentage denoted by X, applicable solely to transactions facilitated through credit cards, herein recognized as a mode of payment.” Keep it simple!
Apply general design principles: Keep it visually easy to read for your customers. Don’t put it too high or too low on your wall and use a readable font (like Times New Roman or Calibri). Consider using bolded or underlined font, different colors, or (royalty-free) visuals to highlight relevant info. The most important info on a surcharging sign is the percentage you charge, and also what other payment alternatives they can use to avoid the surcharge.
Compliance: Depending on your state or credit card network, there may be different requirements or regulations that you need to adhere to so that you ensure compliance. If you’re designing your own credit card surcharging sign, we recommend checking their website for information on any requirements, or using their own template to be safe.
Surcharge Sign Templates & Wording
Now let’s make it a little more concrete and look at the actual wording you could use. Believe it or not, an effective surcharge sign or template can be as simple as:
“We impose a surcharge X% on credit card purchases, which is not greater than our cost of acceptance.”
It’s that easy! You could also add the phrase “We don’t surcharge cash or debit card transactions,” or add which card brands you accept. If you prefer a longer template to work with—especially if you’re a smaller business and want to be more empathetic—here’s a suggestion:
“Dear customer, instead of raising our prices, we now include a X% surcharge fee—which you will see on your receipt—to cover the increased cost of credit card acceptance we must pay. Payments made with cash or debit card won’t be surcharged. Thank you for your understanding!”
For more templates straight from the source, we recommend visiting credit card brands’ sites like Visa to see more examples you can build on.
Convenience Fee Wording
Let’s quickly look at the difference between convenience fees and surcharges. Basically, surcharges can only be added when a customer chooses a credit card, and cannot be greater than the cost of acceptance.
A convenience fee (often a flat dollar amount) can be added when a customer chooses a “nonstandard” payment type, like if a credit card/phone payment is used to pay a bill instead of cash, check, or ACH. Generally speaking, you can’t apply both, and convenience fees are regulated by certain credit card brands, like Mastercard, so do your research there.
If you’re using convenience fees, your sign could read something like:
“For payments made using X, we will impose a convenience fee of $X. We do not apply this fee to transactions made with X payment methods.”
Implementing Your Surcharging Program
We’ve covered a lot of ground today, so here’s a quick recap of the steps you need to take to ensure a successful transitory period.
- Make sure your merchant account provider can accept surcharging. If not, you may need to switch vendors. Plus, make sure they have good reviews and can help you get set up.
- Inform your card network in writing. Send written notice at least 30 days in advance. Providers with surcharging experience can help you find out who to contact and how.
- Inform your customers in advance. While not legally required, helping them understand that you’re not profiting from surcharges can make it an easier pill for your customers to swallow. Once it’s up and running, make sure you have point-of-entry and POS signage.
- Train your staff to effectively communicate. Make sure staff members understand everything we’ve covered in this blog, so they can answer customer questions accurately and promptly.
- Carefully follow all legal and ethical requirements. If you want to ensure total surcharge compliance, make sure your provider is a leading expert in the field so you can leave it up to them.
Wrapping Up
Words matter, which is why how you communicate about surcharging and convenience fees to your (potential) customers matter. Whether you’re looking at it from a legal or customer experience perspective, effective communication around surcharging to help lower your costs as a small business is crucial to set yourself up for success.
If you want to start implementing surcharging to save on processing costs, but don’t know how to ensure 100% compliance, let our team at CardX by Stax be your experts so you don’t have to be. With CardX, you can start accepting credit cards at 0% cost and achieve automated compliance in no time.
Contact us to get started with CardX by Stax today.
Request a QuoteQuick FAQs about Credit Card Surcharge
Q: What is a credit card surcharge and why do businesses implement it?
Credit card surcharging is a practice where merchants charge customers an additional fee for using a credit card. This helps businesses offset the processing fees incurred during credit card transactions, which can be significant. As credit card processing fees rise, more businesses are adopting surcharging as a way to manage these costs while still providing credit card payment options to their customers.
Q: How should a credit card surcharge notice be worded?
An effective credit card surcharge notice should be clear and straightforward. For example, a simple notice can read: “We impose a surcharge of X% on credit card purchases, which is not greater than our cost of acceptance.” It’s crucial to use simple language so customers can easily understand the policy.
Q: Are there legal requirements for displaying surcharge signs?
Yes, legal requirements vary by state and credit card network. Merchants must comply with these regulations, which generally require clear disclosure at both the point of entry and point of sale. Checking specific state laws and credit card network guidelines is essential to ensure compliance.
Q: What are the best practices for designing a surcharge sign?
Best practices include using clear, simple language and making the sign visually easy to read. Placement is important—ensure the sign is at eye level and uses a readable font. Highlight key information like the surcharge percentage and alternative payment methods to avoid the fee.
Q: What is the difference between a surcharge and a convenience fee?
A surcharge is applied when a customer chooses to pay via credit card and cannot exceed the cost of acceptance. A convenience fee is charged for using a nonstandard payment method, like phone or online payments instead of in-person cash or check. It’s important to note that both cannot be applied simultaneously.
Q: How can businesses ensure compliance with surcharge regulations?
Businesses should consult their credit card network guidelines and state laws to understand specific requirements. Using templates from credit card brands like Visa can help ensure compliance. Additionally, working with a knowledgeable provider can assist in navigating these regulations.
Q: Why is it important to notify customers about credit card surcharges?
Transparency with customers is crucial for maintaining trust and ensuring a positive customer experience. Proper notification helps customers understand the reasons behind the surcharge, reducing potential dissatisfaction and complaints.
Q: Can businesses surcharge debit card transactions?
No, surcharging is typically only applicable to credit card transactions. Debit cards and cash payments should not incur surcharges, and this should be clearly communicated to customers.
Q: How can a business start implementing a surcharging program?
To start a surcharging program, businesses should first ensure their merchant account provider supports surcharging. They should also inform their card network in writing, typically 30 days in advance. Training staff and ensuring all signage is compliant and clear are also essential steps.
Q: What should be included in a credit card surcharge template?
A comprehensive surcharge template should include the surcharge percentage, a statement that the fee is not more than the cost of acceptance, and information about alternative payment options. Including a message of understanding to the customer can also be beneficial for smaller businesses looking to maintain empathy and transparency.
