Should You Charge Customers Extra When They Pay with a Credit Card?
It drives me nuts when small businesses don’t accept credit cards.
In this competitive environment, how can you not offer as many payment options as possible for your customers?
A law about credit card fees
As a small business owner, your job is to make your customer’s experience with your business as pleasurable and seamless as possible.
Some merchants and restaurants still don’t get this.
Worse, there are others who do accept credit cards, but then have the audacity to charge an extra fee as a penalty to those customers who choose not to pay cash.
There should be a law!
Wait, now there is. In the U.K., that is.
As of January 2018, a law banned British retailers from charging a fee to customers who pay with a debit or credit card. The law also applies to customers making a purchase online.
This is why England is considered such a civilized society.
Apparently, the surcharge has been pretty widespread there. The U.K. estimates surcharging cost customers £166 in 2015. “It’s completely unfair for someone to be hit by a hidden fee just before they are about to make a purchase, so by scrapping these rip-off charges we are helping to give power back to the consumer,” said Economic Secretary to the Treasury John Glen.
Surcharges in the U.S.
The practice also is not allowed by 10 states here in the U.S. and Puerto Rico. But many businesses in the remaining parts of the country still do this. Some businesses — to skirt the law — then offer “discounts” for using cash (instead of a surcharge for using credit).
There’s still a lot of debate. According to the National Conference of State Legislatures, the Supreme Court gave a “partial victory” earlier this year to those challenging the New York State ban on surcharges because it could be interpreted as “regulating free speech,” and sent the law back to the lower courts for further argument. Free speech indeed.
I say, your business must accept all forms of payment!
Credit cards, mobile payments, PayPal, Apple Pay, Google Pay, cash, Bitcoin. OK, maybe not Bitcoin — yet.
Offering customers convenience
Your number one priority is customer service. In today’s world, customers want their transactions to be easy, pleasant, and fast. Making me run out to an ATM machine to pay for my dinner will motivate me to never dine in your restaurant again. Charging me extra just because I have the audacity to want to use my credit card is a further insult.
Sure, credit card fees are high, and you’re the one shouldering the burden with each transaction. So here’s my advice. Do what the bigger and smarter companies do — push the costs down to your customers.
If the extra 2.5% charge is too much to bear, then figure out what these charges are costing you during the year as a percentage of all of your revenues (it will be less than 2.5% because of your cash customers). Then just increase your prices by that sliver.
Trust me, I’m not going to notice (or quibble over) the $14.50 lasagna after you’ve raised the price by 36 cents. And if your lasagna is as good as you say it is, then I’ll gladly pay!
If raising your prices makes you nervous, some businesses also require a minimum purchase amount to use credit. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 allows businesses to enforce a $10 minimum purchase for credit cards. The regulation, however, doesn’t let business owners impose a minimum purchase amount for some cards and not others. For example, you can’t enforce the minimum purchase amount for Visa credit cards and not apply it to Mastercard.
If you decide to impose a minimum purchase price for credit cards, you should also make sure you and your staff know about each card company’s rules. Visa, for example, doesn’t allow businesses to charge a minimum purchase for debit card users. With a debit card, a customer can run the purchase as credit and not have to enter their pin. So it’s best to make sure you and your staff know the differences between a credit and debit card.
Some advice if you’re charging customers a minimum purchase amount for credit cards? Make sure you’re transparent about it. Put a sign out that customers can easily see. You don’t want to make your customers frustrated that they have to add something to their order to meet the minimum amount.
There shouldn’t have to be a law against charging your customers extra for using a credit card any more than there should be a law prohibiting people from doing dopey things. But in this case, it’s pretty much the same thing.
Do you accept credit cards at your small business? Why? Or why not? Tell us in the comments!
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