4. Cash discounting
Merchants that want to avoid charging their customers extra can also look into cash discounting to incentivize a different payment method instead of penalizing their customers.
Rather than passing credit card fees to customers, businesses can use cash discounting to offer a discounted rate to customers who purchase with cash. This discount can encourage more people to pay with cash which helps merchants minimize or avoid processing fees altogether.
Cash discounting is most common for businesses like gas stations, convenience stores, and service-related businesses such as automotive shops. Cash discounting can be a great option for merchants in states where surcharging is illegal or has limitations.
Is it legal to charge credit card fees?
Depending on which method is used and what your state regulations are, passing credit card fees to customers can be done legally or illegally if you’re not careful.
Businesses should regularly review state legislation to follow surcharging laws and also stay up-to-date on card network policies when it comes to other methods of adding extra charges.
Pros and cons of passing credit card fees to customers
Passing credit card fees to customers has its share of pros and cons for both merchants and customers. Therefore, you should review each method to determine if it’s beneficial for your business.
Cost savings is the most obvious advantage for merchants that pass credit card fees to customers, as it’s the main objective behind these methods. When merchants pass along processing costs, they can offset, reduce, and avoid these fees altogether.
More specifically, surcharging benefits merchants by allowing them to automatically pass charges to customers paying with credit cards for a more streamlined approach, and also give customers the option to pay with cash or debit cards instead.
Cash discounting can benefit both merchants and customers since it incentivizes customers to pay with cash to receive a discounted rate while simultaneously allowing merchants to avoid processing fees.
Other processing costs reduction methods like minimum purchase requirements, cash discounting, and convenience fees may allow for more flexibility for some merchants.
Passing credit card fees to customers also comes with its share of disadvantages that can be damaging for some businesses.
Passing credit card fees to customers can be great for merchants but puts the financial burden onto your customers which may result in fewer sales, fewer return purchases, and a weakened brand image.
Implementing surcharging or convenience fees means staying up to date on evolving state laws, card network regulations, etc. Failing to do so may result in your business going against guidelines or conducting illegal business practices.
Tips for properly passing credit card fees to customers
Merchants that want to effectively pass credit card fees while also avoiding turmoil from their customers can look to these three tips:
- Be upfront and transparent with customers about extra charges
- Follow state legislation and card issuer policies
- Offer additional payment methods besides credit cards to help customers avoid fees
If done right, merchants can successfully pass off credit card fees, conduct legal business operations, and maintain good rapport with customers.
EBizCharge helps merchants reduce credit card fees and optimize this process
Lastly, merchants can look to an all-in-one payment processor like EBizCharge to significantly reduce credit card processing fees by offering zero hidden fees, no setup costs, no cancellation charges, and more.
In addition to a seamless payment experience, EBizCharge allows merchants to surcharge customers to further minimize processing fees and save more money.