What is a Surcharge? A Guide for Credit Card Surcharges

What is Surcharging: What Merchants Need to Know

Credit card surcharging refers to the practice of adding a fee to a customer's bill when they pay with a credit card. This fee is intended to cover the costs associated with processing the credit card payment and businesses can save significantly on their bottom line. However, the rules and regulations for surcharging need to be understood before implementing a compliant Surcharge Program. We'll break down what credit card surcharging entails, the rules, and how merchants can implement it correctly.

Imagine this scenario: a business that processes $23,000 in credit card transactions monthly, paying 2.8% in fees, which totals $644. By implementing a surcharge program, the business can pass these fees to customers, effectively saving $644 each month, or $7,728 yearly.

Surcharging can retain between 25% and 85% of your payment processing fees. The specific percentage you save will depend on the proportion of your total fees that come from credit card transactions versus debit card transactions.

The Legal Landscape of Surcharging

Before implementing a surcharge, merchants must be aware of the rules and guidelines. Both Visa and Mastercard have specific guidelines regarding surcharging that must be followed in addition to state-specific laws. Furthermore, surcharging cannot be applied to debit card or prepaid card transactions.

Visa's Surcharging Rules

Visa has clear and strict guidelines for merchants who wish to implement surcharging:

• Surcharge Cap: The surcharge must not exceed the cost of acceptance for the credit card. Visa sets this cap at 3%.

• Disclosure: Merchants must clearly disclose the surcharge to customers before the completion of the transaction. This includes both in-store signage and disclosure on receipts.

• Applied Before Tax: Our program automatically adds the 3% before tax is calculated

For more detailed information, you can review Visa's full rules here.

Mastercard's Surcharging Rules

Mastercard also sets specific rules for surcharging:

• Surcharge Cap: The surcharge must not exceed the cost of acceptance for the credit card. Mastercard sets this cap at 4%.

• Disclosure: Merchants must clearly disclose the surcharge to customers before the completion of the transaction. This includes both in-store signage and disclosure on receipts.

• Applied Before Tax: Our program automatically adds the 3% before tax is calculated

For more detailed information, you can review Mastercard's rules here.

How to Implement Surcharging Properly

Here's how PayAcre implements our Surcharge Program for merchants.

1. Understand the Costs: We set a flat rate of 3% for surcharging for all credit cards to keep it simple and transparent. If your passing on more than this, you are likely not compliant and are charging your customers more than necessary.

2. Upgraded Equipment: Ensure your Point-of-Sale (POS) systems and terminals can handle surcharging correctly.

3. Customer Notification: Clearly inform customers about the surcharge at the Point-of-Sale and on their receipts.

In addition, we offer training for staff members to ensure they understand the process to avoid customer confusion, have surcharging-capable equipment, and handle the registration and reporting to the card brands on your behalf. Our dedicated team is ready to assist you every step of the way to determine if surcharging is right for your business.