Credit card surcharging has become an increasingly popular topic among business owners looking for ways to offset processing costs. But what exactly is surcharging, where is it legal, and is it the right choice for your business?
What Is Credit Card Surcharging?
Surcharging is the practice of adding an additional fee to a customer's transaction when they pay with a credit card. This fee is intended to cover the cost of processing the credit card payment, effectively passing the processing expense from the merchant to the customer.
Where Is Surcharging Illegal?
Credit card surcharging is not legal everywhere. As of now, surcharging is prohibited in the following states:
- California
- Florida
- Kansas
- Maine
- New York
- Oklahoma
- Texas
- Utah
If your business operates in any of these states, you cannot apply a surcharge to credit card transactions. However, there is an alternative that is legal in all 50 states: cash discounting.
Cash Discounting: The Alternative
Cash discounting works differently from surcharging. Instead of adding a fee for credit card use, you offer customers a discount for paying with cash. The end result is similar, but the legal and psychological framing is different. Customers perceive a discount positively, whereas a surcharge can feel like a penalty.
The Post-COVID Economy and Surcharging
In the post-COVID economy, with high inflation impacting businesses across every industry, most business owners have made the switch to either surcharging or cash discounting. The rising costs of goods, labor, and overhead have made it increasingly difficult for businesses to absorb credit card processing fees on top of everything else.
As a result, passing these costs to the customer has become widely accepted and understood. Customers are more accustomed to seeing surcharges or cash discounts at checkout than ever before.
How The Merchant Way Can Help
The Merchant Way offers tailored surcharging and cash discount solutions designed for your specific business needs. Our clients save up to $1,000 per month by implementing these programs correctly and compliantly. We handle the setup, signage requirements, and ensure your program meets all card network rules and state regulations.