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 use it?
A credit card surcharge is an additional fee that a merchant adds to a customer’s bill when they use a credit card for payment. Businesses use surcharges to cover the costs associated with processing credit card transactions, which can include interchange fees and assessment fees. This helps businesses manage their expenses without increasing the base prices of their products or services.
Q: Are there any legal requirements for notifying customers about credit card surcharges?
Yes, merchants are legally required to notify their customers about credit card surcharges. This includes displaying clear signage at points of entry and point-of-sale locations. The notification must specify the surcharge percentage and inform customers about alternative payment options that do not incur the surcharge.
Q: How should a business word their credit card surcharge notice?
The wording of a credit card surcharge notice should be clear and straightforward. A simple template could state: “We impose a surcharge of X% on credit card purchases, which is not greater than our cost of acceptance.” Additionally, businesses may include, “We do not surcharge cash or debit card transactions.”
Q: What are best practices for designing a credit card surcharge sign?
When designing a surcharge sign, use simple language and ensure the text is easy to read. Place the sign at eye level and use a legible font. Highlight important information, such as the surcharge percentage, using bold or colored text. Ensure compliance with any specific design regulations required by your state or credit card networks.
Q: How can businesses ensure compliance with credit card surcharging regulations?
Businesses can ensure compliance by consulting the websites of major credit card brands like Visa and Mastercard for specific surcharging guidelines. Additionally, they should work with merchant account providers experienced in surcharging to ensure all legal and ethical requirements are met.
Q: What is the difference between a convenience fee and a surcharge?
A surcharge is applied when a customer chooses to pay with a credit card and cannot exceed the cost of card acceptance. A convenience fee, often a flat amount, is charged when a customer uses a nonstandard payment method, such as paying a bill by credit card instead of cash. Businesses cannot apply both fees simultaneously.
Q: How should businesses inform customers about upcoming credit card surcharges?
While not always legally required, it is good practice for businesses to inform customers about upcoming surcharges in advance. This can be done through email notifications, social media updates, or in-store signage. Clearly explaining the reason for the surcharge can foster understanding and minimize customer dissatisfaction.
Q: What steps should a business take to implement a credit card surcharge program?
To implement a surcharge program, businesses should:
- Verify that their merchant account provider supports surcharging.
- Notify their card networks in writing at least 30 days in advance.
- Inform customers through clear signage and communication.
- Train staff to answer customer questions about surcharges.
- Continuously review and adhere to legal requirements to ensure compliance.
