Should You Charge Credit Card Customers a Surcharge?

It's a big decision that could impact your business in different ways.

Credit card companies are in the business of making money. To do so, they impose different fees on consumers, from late fees to annual fees to foreign transaction fees.

But credit card companies also charge a boatload of processing fees to the merchants that accept them. And while that's a great thing for credit card companies, it's a cost that's become increasingly burdensome as inflation has made it harder for small businesses to stay afloat.

If you own a small business, you may be at the point where credit card processing fees are eating too much of your profits. And you may be inclined to start passing those fees onto your customers.

It's a practice a lot of small businesses are upholding these days. But is it really the right choice for you?

The upside of charging more for credit cards

Some consumers may not mind paying a surcharge for using a credit card because they know it's the most convenient way to pay. And some might figure what they spend in surcharges, they'll get back in reward points. If you start passing those fees onto consumers, you could reap a lot of savings. 

The downside of charging more for credit cards

Some customers may not take kindly to credit card surcharges -- especially because they're a fairly new thing. And so if you start imposing them at your place of business, you may find that you end up losing customers -- and losing money.

Plus, it's important to think about your reputation as a business. Do you want to be thought of as an establishment that nickels and dimes the people who support your establishment? Or do you want to be thought of as a business that adds value to the community and cares about its customers?

The right way to impose credit card surcharges

You may be at the point where you simply can't afford to not pass credit card fees onto consumers. But if you're going to start doing so, make that practice clear.

First, post signs on your door or in reasonably visible places letting your customers know of that change. Next, keep your message clear but honest. Explain why you've had to make the tough decision to start imposing those fees and thank your customers for understanding. If you have an email list or social media page, put that information up there as well. 

At the same time, consider being flexible with this new policy -- and letting your customers know that it may not be permanent. If inflation levels start to cool, you may reach a point where you can stop imposing those added fees, and that's something worth stating expressly. 

The reality is that many small businesses these days aren't adding on credit card surcharges to be greedy. They're doing it to stay open. And if you make that abundantly clear, you may find that your customers are willing to put up with that practice without holding it against you. Some might even start spending more money at your business if they end up sympathizing with your plight.