Can you pass payment processing fees to customers?
There are legal options for passing on credit card fees to customers. Credit card surcharging and cash discounting are two options for passing on fees. Adding a surcharge to credit card payments is not legal in every state, but offering a cash discount is.
Credit card surcharges, convenience fees and minimum purchase requirements are all strategies merchants can use to offset the cost of pricey processing fees. They are legal in most states, but businesses must: Disclose any surcharges at the point of sale and on the receipt.
Is Debit Card Surcharging Legal? For debit cards and prepaid cards, surcharging is prohibited—even when the card is run as a signature-based transaction without the PIN. This restriction was implemented by the Durbin Amendment of the Dodd-Frank Wall Street Reform and Consumer Protection Act.
If you have chosen to use Stripe as a payment service, you can automatically add a processing fee to the payment total when your customer pays by credit card. You can do this by going to Settings > Payment Services and selecting the Charge my customer a processing fee option.
Examples of Customer Notifications
For example, a point-of-entry disclosure could read as: “We impose a surcharge on credit cards that is not greater than our cost of acceptance.” In a point-of-sale scenario, your signage might display specific charges, such as: “We impose a surcharge of X% on the transaction.
The answer is: yes, if your business operates in states where it is legal to do so. As of the time of publishing this, the practice of imposing additional fees on credit card transactions (i.e., credit card surcharges) is prohibited in only three U.S. locations: Connecticut, Massachusetts, and Puerto Rico.
Credit card processing fees typically cost a business 1.5% to 3.5% of each transaction's total. For example, you'd pay $1.50 to $3.50 in credit card fees for a sale of $100.
A payment surcharge is considered excessive if it exceeds the 'cost of acceptance'. For example, if your cost of acceptance for Visa Credit is 1% you can only surcharge 1% on Visa credit card payments. You are not required to impose payment surcharges, it's your decision.
Can businesses charge whatever they want as a surcharge? No, major credit card companies have rules that limit the amount a merchant can add to a customer's credit card purchase but typically prohibit businesses from charging more than their actual cost for processing credit card transactions.
A surcharge is not a convenience fee. A convenience fee is levied by a merchant for offering customers the privilege of paying with an alternative non-standard payment method. Merchants can process convenience fees in all 50 states. A surcharge is levied by a merchant for customer purchases made with a credit card.
Who pays Stripe processing fees?
Additional Stripe Tools
This card reader enables in-person checkouts. In addition to covering the cost of the card reader, businesses pay a processing fee for each transaction.
The main difference between Square and Stripe is that Square is best suited for in-person transactions while Stripe is a developer-friendly platform best suited for e-commerce, subscriptions and other online payments.
Stripe's optimized checkout suite delivers a frictionless customer experience. Increase revenue and save thousands of engineering hours with prebuilt payment UIs, easy access to more than 100 payment methods, and Link, Stripe's one-click checkout.
- In-person: “There will be a $3 flat fee for online payments and credit cards. ...
- Online: “By selecting 'credit,' you agree to pay a $3 convenience fee.”
- Over the phone: “I'm happy to process your credit card payment, but please be aware there is a $3 convenience fee.”
Surcharges are additional fees and/or taxes that consumers are required to pay when they buy certain goods and services. Surcharges are typically added at the final stage of purchase; when the buyer pays for the good or service. Surcharges may be set at specific dollar amounts, such as $5 per transaction.
Key Takeaways. A convenience fee is a fee charged by a business for payments made through an alternative channel, rather than by cash, check, or ACH. Typical cases where convenience fees are charged include payments for taxes and tuition. The fee is typically a fixed amount or a percentage of the sale.
- Choose a credit card processor with a surcharge program. ...
- Verify addresses for lower credit card fees. ...
- Give a cash discount to customers. ...
- Always examine your monthly statement. ...
- Add a service or convenience fee. ...
- Encourage ACH payments.
To begin with, surcharges must be made clear by the merchant prior to a sale. “Signs must be posted at the cash register or point of acceptance,” explained Fortney. “The sign must clearly state that a fee of X% will be added on to any payment made with a credit card at time of the sale.”
- Review your statement regularly.
- Switch processors.
- Try surcharging.
- Set a credit card minimum.
- Accept cards in person.
- Chargeback policies and fraud prevention.
- Offer cash discounts.
- Partner with Sekure.
The reason why credit card companies charge a percentage to accept payments from customers on their network is because it's how they make money. Simple as that! This fee, known as the merchant discount rate (MDR) typically ranges from 2-3%, sometimes they can be as high as 5%.
Can my business add a surcharge for card paying customers?
Are Credit Card Surcharges Legal? If you're wondering if it is legal to charge credit card fees, the short answer is yes in most states.
Credit card processing fees are paid by the merchant, not by the consumer. Businesses and their acquiring banks pay credit card processing fees to the consumer's credit card issuer, credit card network and payment processor. On average, credit card processing fees can range between 1.5% and 3.5% of the transaction.
A credit card surcharge is an additional fee that a business may add to a transaction when a customer pays with a credit card. The purpose of this surcharge is to cover the costs that the business incurs for processing credit card payments.
After a class action lawsuit against Visa and Mastercard, businesses won the right to mark up card-based purchases to help cover their added costs. Surcharges may be up to 4% of the purchase at most but are often around 2% to 3%, in line with the seller's processing fees.
To date, only two states and one jurisdiction still outlaw the use of credit card surcharges. They are a result of non-qualified transactions of different communications methods.: Connecticut, Massachusetts, and Puerto Rico.
