Running a successful e-commerce business is a delicate balance of managing costs while providing convenient payment options for customers. One common strategy business owners use to offset costs and maintain profits is adding a surcharge to credit card transactions. 

Here are some common reasons merchants add credit card surcharges: 

  • Offsetting Processing Costs: One of the main reasons merchants add credit card surcharges is to offset processing fees from credit card transactions.

    Credit card companies charge businesses fees for facilitating electronic payments, and those fees can stack up, especially if your customers frequently pay by credit card.

  • Encouraging Cost-Effective Payments: Businesses also implement surcharges to incentivize other cost-effective payment methods, like cash or alternative payment options with lower fees. Offering discounts for cash payments is an alternative strategy to steer customers toward cheaper payment methods.

Navigating Regulations and State Laws:

  • Legal Compliance: Merchants must be aware of and comply with the regulations governing credit card surcharges in their respective regions. Some states may strictly regulate or prohibit surcharging. Failing to adhere to these laws can result in penalties.

  • Clear and Conspicuous Disclosure: Transparency is critical regarding surcharges. Businesses are often required to provide clear and conspicuous disclosure of surcharge policies to customers before completing a transaction. This disclosure ensures that consumers are aware of any additional charges for paying by credit card.

  • Understanding Maximum Limits: Credit card companies may impose maximum limits on surcharge amounts in regions where surcharges are allowed. Merchants must know these limits and ensure they do not exceed the legally permissible surcharge percentages. We recommend checking with your own legal counsel on best practices before implementing surcharging.

  • Restrictions on Payment Methods: Merchants should be mindful of any restrictions on surcharging specific payment methods. For example, some jurisdictions may prohibit surcharges on debit card transactions or government-issued cards. 

How surcharging works within InkSoft: 

  • The surcharge is clearly posted before check-out
  • The surcharge is restricted to 3%. This percentage is the maximum amount under Visa’s maximum amount allowed. Visa also requires that you not pass on more than what you are charged. If you are unaware of your current rates, please contact your CSM. 
    • Please note: this maximum amount may be higher than the maximum rate imposed by your state. Consult your own legal counsel to determine the correct percentage to pass on to your customers.
  • Surcharges only apply to credit card transactions and exclude debit card transactions in alignment with Card Brand Rules. 

Implementing credit card surcharges is a strategic decision that requires a delicate balance between managing costs and providing a positive customer experience. Merchants must stay informed about the regulations and state laws governing surcharging, ensuring compliance and transparency in their business practices. By navigating these complexities effectively, merchants can strike a balance that benefits their bottom line and their customers’ expectations.