Adding a service charge for customers using credit cards

I have noticed quite a few small businesses in my area adding a 2-4% fee to purchases when customers use a credit card to pay. Have any of you implemented this policy and if so how was it received? Have had some people say just to raise prices across the board to avoid any negative customer feedback from card users? I do a little over 7 figures in credit card sales alone every year so the 3% is a big number for me. Should i just be happy that i am so busy and continue to absorb the fee?

I can definitely understand the rationale behind credit card fees, but to me, either we accept them as a form of payment or we don’t. The majority of my sales are paid by credit card, so I take that into account when pricing menu items. (my grandparents are rolling over in their graves… the idea of buying a pizza on credit would blow their minds).

Pricing differently depending on the tender type can lead to communication issues, also-

[INDENT]Customer: what does my total come to?
Phone person: that depends on how you want to pay…

Customer: I was told on the phone that it would be $28.97- why did you charge me $29.83?!
cashier: well, we added a fee because you put it on your card…
[/INDENT]
Gas stations resolve the issue by posting both prices, but I’ll be damned if I’m going to re-write my menu with two prices for each item.

If you do choose to implement a credit card fee, I would definitely not frame it as a fee- it’ll only stir resentment. Better to frame it as a discount for paying in cash.

There is a department store here in Canada that gives you “Store Money” if you pay by cash. It works out to about 2% of your purchase and is redeemable as cash at the store. Their products are priced as though you will be paying with credit.

Charging a fee is against most processing agreements. Better check your processors policy first.

would love to pass the fee to customers , but , i try to do everything i possibly can to NOT piss off my customers ( not always successful ! ), long time ago we charged .50 for to go orders ( attempt to recoup box ) it surprised me how irate some people became over .50 ! we no longer charge for "to go ", trying to work harder at giving , the good vibes are priceless

I never understood charging a service fee to use a cc. My uncle does it. You’re paying a percent of the sale plus a swipe fee, so if you make the customer pay more-you pay more. It only complicates things. You prob pay 3 % of the sale.
Would you rather have 97% of something, or 100% of nothing.

The amount of $$ the CC system is raking off of all of us is insane. We do about 70% of sales by credit card, so using the 3% round number for CC cost, 3% of 70% comes to basically 2% of gross. How does 2% of of gross compare to your take home from the business? For most operators that would be between 10% and 20% of what you make on your business!

In all the years we have been open we have never had a fraudulent transaction… so who are they protecting?

They are doing pretty well off of all of us: http://finance.yahoo.com/echarts?s=V+Basic+Chart#%7B%22range%22%3A%225y%22%2C%22scale%22%3A%22linear%22%7D

@December The math is pretty simple: Charge 3% fee on a $20 transaction (60 cents, lets call it 15 cent swipe fee + 2.2% ) and your CC costs go up a whopping 1 cent

I would love to do it… even more I would like to be able to choose what cards to accept by fee rather than by brand… i.e. I can choose not to take Amex for example, but some of the double and triple “points” visa cards have higher fees. If the customer is using me to pad the vacation savings account, I should be able to charge for it! But… I agree I think there would be some backlash… so raise the prices again! Bottom line, with our average ticket and assuming 70% card sales and 3% costs, I need to get 70 cents more per order to cover CC fees.

I just love paying CC fees on sales tax too. For every million dollars of sales at our local tax rate (same assumptions) I pay $2,000 in CC fees on the sales tax that is collected!!

Yes - I would love it! Nearly $200,000 a month in credit card sales in my 3 units and 3% never sees me! Lucky for my my transaction fee is only 3¢ and in the shops where I do 35-45% walk in I get to swipe so the % is lower but the more frustrating thing is the speed at which the CC company pays me. Why is it if the banks are closed on a Monday that my normal deposits on Wednesday (which are technically from Sat & Sun sales) are delayed to Thursday? Anyway - I have always heard it was illegal to charge extra fees but maybe that’s just in each agreement.

I hear you Bodega… Espcially with that sales tax thing.

I posted too quickly and regurgitated what someone told me about cc’s.

The first week I opened I didn’t have a cc machine the customer backlash was intense.

If we (pizzeria owners) could do something united about this id love to.

Visa and Mastercard lost a class-action lawsuit and since January 2013 we merchants are able to tack on a surcharge with certain limitations:
http://usa.visa.com/merchants/merchant-support/merchant-surcharging.jsp
www.mastercard.us/merchants/support/surcharge-rules.html
Amex still forbids surcharges. Discover card has it’s own rules (which no one cares about).

I’d rather offer a discount for cash than nickle and dime (or quarter and half-dollar) customers to make a point. Tacking on a surcharge makes the merchant, not Visa or MC, look bad. Better yet, just build this cost of doing business into your prices and focus on service and quality.

First off, thanks a lot Bodegahwy! I hadn’t even thought about paying a percentage based on sales tax. Even though it is a minimal amount, that will rile me up just thinking about it.

As for things I can control…I think we should be upset about the processing fees and we should be making waves about it, but I don’t like being in an adversarial relationship with my customers so I have always resisted charging the customer. I would prefer to take the fight directly to the CC companies in whatever form we can.

I am not opposed to putting up a “We prefer cash” sign with a tactful explanation of why, but that is about as far as I would want to go.

I think we would be better off working with legislators and trade organizations to apply pressure to decrease rates.

I believe that you can offer a cash discount, but cannot place a surcharge

I simply tell them we charge a $1 to run a card over the phone. NEVER had any one complain about it.

@GotRocks check out the links Brad posted above. It is pretty clear that we can now charge customers for paying with Visa/MC now with some hoop jumping regarding notification. I am still reluctant to do so for all the reasons discussed above, but if I start seeing it around more I will re-think that. To me it is like delivery charge… the customer who uses the service pays for it rather than building it all into the price and charging everyone.

yeah i have some short fused customers that would rip me a new one for charging a fee to run their cc but i like the idea of a cash discount.

Just be sure to research your local laws, Since the CC company’s lost the law suit, states have been enacting different laws on how business can handle it.

If i remember correctly here in CO, you can only offer a discount to cash customers. I never really looked into it because i just rolled the extra expense into my base pricing model. Since 70 to 80% of my transactions are CC anyways.

My state doesn’t care so I hadn’t even realized this was being done, here’s a list of how different states handle it (if anyone can find a more up-to-date list, please post it): http://www.ncsl.org/research/financial-services-and-commerce/credit-or-debit-card-surcharges-statutes.aspx

Wow, Wisconsin allows a surcharge, and this:

Wis. Stat. 422.422
No credit card issuer may, by contract or otherwise, prohibit a merchant from offering a discount to a customer to induce the customer to pay by cash, check, or similar means, rather than by use of a credit card or its underlying account, for the purchase of goods or services.

I think I may start offering a small discount for cash, I see that as being easier to explain than adding a CC surcharge. Card usage has gotten ridiculous these last few years, I see purchases for less than $10.00 all the time on cards

I think that offering a discount for cash is all well and good, but it really just whistling in the wind. I see the trend to card use just getting stronger and fully expect my business to be 90% cards within a couple of years.

d9Phoenix is correct about the Colorado law except the wonderful a$$hole morons we have in our state govt exempted themselves!!

Under Colorado law (C.R.S. § 5-2-212), it is illegal for any merchant to impose a surcharge on a purchaser or lessee who elects to use a credit or charge card in lieu of payment by cash, check, or similar means. A surcharge is any additional amount imposed at the time of the sales or lease transaction by the merchant, seller, or lessor that increases the charge to the purchaser or lessee for the privilege of using a credit or charge card and includes those cards pursuant to which unpaid balances are payable on demand. This prohibition does NOT apply to convenience fees charged by a state or local government entity which accepts payment by credit or charge card

This prohibition on surcharges does NOT apply to debit cards.

A discount offered by a seller or lessor for the purpose of inducing payment by cash, check, or other means not involving the use of a seller or lender credit card does NOT constitute a finance charge if such discount is offered to all prospective purchasers and its availability is disclosed to all prospective purchasers clearly and conspicuously.

Never thought about the sales tax too… Great points