Credit card usage in the US has grown steadily over the past few decades. According to data compiled by the Nilson Report via Payments Dive, U.S. credit card purchase volume climbed 6.1% to reach $6.51 trillion in 2024, proving that credit card reliance is only intensifying.
Unfortunately for businesses, this also means greater processing costs—which can quickly add up. Not surprisingly, credit card surcharging is increasingly becoming an attractive option for more and more businesses to offset these costs.
As such, SaaS companies that offer integrated payments would be wise to tap into this opportunity and upsell surcharging to their merchants. In this article, we’ll explore the case for upselling surcharging and how to do it right.
TL;DR
- Credit card brands or networks like Visa, American Express, Mastercard, and Discover charge certain fees per transaction (often called interchange fees) when customers use credit cards to make payments at a business. Usually, the merchant shoulders this fee, but as they start adding up, these fees can cut into their profits.
- Credit card surcharging allows businesses across a wide range of industries to offset processing fees, which can be immensely beneficial for merchants that have a slim profit margin.
- As a SaaS provider that offers integrated payment processing to merchants, upselling surcharging can be a great way to build better relationships with customers and increase user adoption. Stax Connect helps you offer a surcharging add-on easily—without any substantial developmental or financial investment—all while aiding in compliance and security for your users.
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Understanding credit card surcharging
Credit card brands or networks like Visa, American Express, Mastercard, and Discover charge certain fees per transaction when customers use credit cards to make payments at a business. The merchant typically takes on this fee, but they can quickly cut into profits. That’s why, almost every American state (with a few exceptions) now allows businesses to pass this transaction fee on to the customer in the form of a credit card surcharge.
Legal and regulatory considerations
Merchants need ongoing legal compliance with card-network rules and other compliance requirements when adopting credit card surcharging practices.
In the United States, Visa has made major changes to its surcharging policies—one of which was lowering their surcharge rate from 4% to 3% for its network in the United States. This requires merchants to lower the surcharge to 3% for all brands’ credit cards when Visa is accepted.
Furthermore, as noted in a recent guide by Verisave, a landmark $5.54 billion court settlement implemented a minor 0.10% average reduction in interchange rates for five years. While this offers minor relief, overall transaction costs still routinely eat up 1.5% to 3.5% of merchant revenue, keeping surcharging highly relevant. Under standard surcharging practices, fees apply only to credit card transactions, and merchants cannot surcharge debit cards or prepaid cards. Merchants should also align fees with credit card companies’ rules.
Disclosure requirements include advance notice at checkout and a separate line item on receipts, along with meeting local payment processor and consumer protection standards for regulatory compliance.
Current market trends related to surcharging
Credit card surcharging allows businesses to offset processing fees, which can be immensely beneficial for companies that have a slim profit margin.
In fact, as merchant discount fees hit a staggering record high of $187 billion, a study by PCMI revealed that 34% of small merchants have resorted to surcharging to preserve their bottom lines—a massive leap from just 5% a few years prior.
Yet some merchants might be hesitant to surcharge because of concerns about customer perception, customer experience, and the risk of dissatisfaction or backlash. Their fears aren’t unfounded: according to the J.D. Power 2026 U.S. Merchant Services Satisfaction Study, 32% of merchants report that retail customers occasionally or frequently cancel a purchase and walk away when a surcharge is tacked on.
However, a survey by PYMNTS and Payroc found that 85% of cardholders who paid surcharges were fully aware of them in their most recent transactions.
Friction can be mitigated with clear and transparent communication and compliant signage/software notifications at checkout. Customers react favorably to surcharges when they are properly informed about them, as well as understand why they are required.
Credit card surcharging may also encourage customers to choose lower-cost payment methods or other payment options, such as debit cards or ACH.
Common industries that implement surcharging
Credit card surcharging has been successfully used in many industries to offset the cost of accepting credit card payments. Here are a few examples.
Financial and legal services
Businesses that offer financial or legal services, such as accounting, tax management, law offices, etc., collect credit card surcharges from their clients to manage processing costs.
Service industry
Accepting credit cards is a great way to accommodate a bigger customer base. In return for allowing credit card payments, plumbers, contractors, repairmen, handymen, landscapers, and other such service providers add surcharges when their customers pay by credit cards.
Health and wellness industry
In the healthcare and wellness industry, certain professionals, such as estheticians, plastic surgeons, veterinarians, and dermatologists, provide services that are often not covered by insurance. Apart from paying by check and cash, many patients make payments with credit cards, for which these businesses add a surcharge.
The case for upselling surcharging to merchants
For a SaaS company, offering payment processing to its customers can be a lucrative option. Offering integrated payment processing makes your product a full-service solution for customers, thereby increasing customer loyalty and confidence.
As a SaaS provider that offers integrated payment processing to merchants, upsell surcharging is a sales strategy where you add a premium or upcharge to move a buyer from a base-level purchase to a higher-tier option. Its primary goal is to increase Average Order Value (AOV), and it can do that while maintaining customer trust when the offer is positioned clearly. Offering surcharging to merchants can also be a strategic way to build better relationships with customers and increase user adoption. To understand why, let’s take a look at the payment processing costs merchants typically have to bear.
Payment processing costs for merchants
There are three main kinds of payment processing fees and transaction fees that merchants pay on every credit card transaction: interchange fees, assessment fees, and payment processor fees.
Of these, the first two are set by card networks and are unavoidable. The third fee is set by the payment processor depending on the pricing structure they use (flat-rate, tiered, interchange-plus, or membership-based).
All of these, put together, may cost a merchant between 1.5% and 3.5% of the transaction amount. In many cases, credit card fees in the U.S. typically range from 2% to 3%, which can materially affect profit margins.
Requirements of credit card surcharging
With surcharging, merchants may only pass on the cost of acceptance to the cardholder and cannot generate a profit from credit card surcharging. Merchants must inform cardholders that they will need to pay a surcharge if they choose to pay by credit card. Transparent communication also means clearly disclosing the surcharge amount wherever customers are notified.
They will also need to display the percentage customers will pay as a surcharge, which will need to be shown as a separate line item on the receipt for credit card purchases. And of course, merchants will need to make sure that they abide by all applicable federal and state laws related to surcharging. When surcharging is framed as part of an upsell or premium offer, the fee should be tied to a tangible benefit so customers do not see it as arbitrary adding fees.
Benefits of upselling surcharging for SaaS companies
As a SaaS company providing integrated payment processing, if you can show your merchants how they can more predictably recover payment processing costs through surcharging on your platform, upsell surcharging can support business growth while helping you build stronger customer relationships and bring in more revenue.
Plus, merchants can benefit from the following.
Convenience. For one, it will be more convenient for them to pay for an add-on surcharging feature on the same platform instead of looking for a third-party surcharging tool. Supporting multiple payment options in one place can also simplify business operations for sub-merchants.
Guaranteed compliance. If your solution handles surcharging-related compliance automatically, it takes away a lot of headaches for sub-merchants and gives each business owner more personalized service through guidance tailored to their needs.
Steps to take before upselling surcharging
Of course, before you upsell surcharging capabilities, SaaS companies should analyze payment data to see how often customers use cards and how acceptance varies by payment habits before implementing credit card surcharges for sub-merchants. Surcharges will have a minimal effect on a business’s bottom line if most of its customers don’t use credit cards.
Second, credit card surcharges are not a flat rate but a percentage of the transaction amount. Consider whether your business is selling high-ticket items/services, since percentage based fees can feel more noticeable at higher price points and make surcharging less attractive for customers in this case. Customers may be more willing to pay a 3% surcharge on a few dollars than a large purchase of, say, $1,000.
Helping your merchants adhere to legal and regulatory policies is another great way to improve customer satisfaction. You could also offer advice on how they should inform their customers about surcharging, how they can ensure that surcharges are listed clearly on receipts, and why they should review local laws and broader compliance requirements before rollout. By increasing the level of confidence that sub-merchants have in your expertise on surcharging, you can increase your chances of success.
Best practices for upselling surcharging to merchants
Keep the following in mind before you think of upselling surcharging to your SaaS users.
Knowing your merchants
Analyze payment data and show your users how they can recoup some of the costs of credit card processing by adding surcharges, especially for small businesses that are often the most sensitive to processing costs. Some merchants might be hesitant to surcharge, fearing customer dissatisfaction and even backlash, so they should clearly inform customers about the surcharge policy during the sales process and on invoices.
However, if customers are informed properly, they may be more willing to pay surcharges. You can work with your customers to come up with a surcharging plan that works best for them.
Successful communication strategies
The pros and cons of surcharging should be clearly communicated to your merchants. Surcharging may help them increase profits, but there is a cost associated with setting up surcharging and complying with national, state, and brand-level regulations. All this should be clearly communicated to merchants with the promise that as their payment provider, you will be able to guide them through the transition.
Providing ongoing support and education to merchants
After you have successfully upsold surcharging to a merchant, you need to notify them if there are any changes in regulations, updates from credit card networks, or in your own company policies. Going this extra mile will not only reassure your customers but also ensure that they aren’t unknowingly breaking any rules. You should also provide ongoing customer support to merchants so that they can get their surcharging questions clarified and issues fixed.
Being aware of common objections
The most common objections against surcharging are customer dissatisfaction and complicated rules and regulations. Show them how customer dissatisfaction can be mitigated with proper information and education of end users. When it comes to legal and regulatory hurdles, show your sub-merchants that you are willing to educate them when they decide to purchase your surcharging add-ons.
Final words
Offering a surcharging option, alongside alternatives like cash discounting, that can be plugged into your payment platform is an excellent way to bring in more revenue. Stax Connect helps you create a complete payments ecosystem from scratch—in as little as 30 days. It also ensures that you can offer a surcharging add-on easily without any substantial developmental or financial investment—all while ensuring compliance and security for your users. To learn more, contact the customer support team at Stax today.
FAQs about upselling surcharging
Q: What is credit card surcharging?
Credit card surcharging is when a business passes on the fees charged by credit card brands to customers, adding a surcharge to credit card payments to offset processing costs.
Q: What are the benefits of surcharging for merchants?
Surcharging allows merchants to offset credit card processing fees, which can be beneficial, especially for businesses with slim profit margins. When done right, surcharging helps merchants improve profitability and allocate resources more effectively.
Q: Why should SaaS companies upsell surcharging to its merchants?
By providing integrated payment processing, your SaaS product becomes a comprehensive solution, boosting customer loyalty and trust. Upselling surcharging can further enhance customer relationships and drive user adoption, given that you’re helping merchants reduce their payment processing costs.
Q: What are the best practices around upselling surcharging to SaaS merchants or users?
Here are some of the steps you can take to successful upsell surcharging to sub-merchants:
- Analyze payment data to identify merchants who would benefit most from surcharging.
- Communicate the pros and cons of surcharging, including compliance requirements.
- Provide ongoing support and education on regulations and updates.
- Address common objections, such as customer dissatisfaction and complex rules.
- Offer a seamless surcharging solution within the SaaS platform to enhance convenience and compliance.
