At first, it seemed incredulous that an airline would charge loyal customers for what had once been a free service. Then it became common practice. Consumers came to expect it, just as they came to expect seat sizes to shrink and in-flight snacks to disappear (it’s hard to say which was more disappointing!).
A similar phenomenon has started occurring among businesses across the nation: credit card surcharging. Just last year, Hilton began adding a “credit card surcharge tax” to its guests’ ledgers– a fee associated with using a credit card for rewards as opposed to paying with cash. They are not alone.
In the era of pandemic recovery, many businesses are looking for ways to contain costs. Recent changes to laws concerning credit card surcharging, passing along a 4% fee has become a sensible and simple way to cut expenses.
And why shouldn’t they?
Rewards cards are becoming more popular as consumers are incentivized to use a credit card for larger purchases even if they have the cash to earn the rewards of 1%, 3%, even 5% cash back. Yet, despite the payouts to cardholders, it is obvious from the constant advertising of rewards cards, that they are a huge profit center for the sponsoring banks. But who bears the brunt of the cost of cash rewards? Businesses, large and small do, not the sponsoring banks. Businesses pay for cash back rewards through higher interchange, or merchant fees. Meaning the cost of processing rewards cards resulted in higher merchant fees with no legal means to pass it on. Until now.
Recently, the Supreme Court upheld a ruling on a case filed on behalf of businesses to legally (and compliantly) allow surcharging. As a result, 48 states have passed legislation making it legal to surcharge, while allowing consumers choice – to pay the surcharge for the privilege of using their rewards card or pay no fee if paying with cash.
Surcharging technologies now make it possible for businesses to compliantly pass on the interchange to their customers. Businesses have more than their share of challenges to contend with, especially given the pandemic. Claiming back the 2.5% to 3.5% that otherwise went to banks as interchange cost is one way to help stay afloat and make a profit.
Today, when entering the doors of small businesses, look for a sticker on the door informing customers that the business has implemented a cash and credit card price or an increased credit card price or a cash discount. All variations of surcharging. Ask how the program has impacted the business. Have customers protested the practice? The answer you hear will be no. No, because customers, like added airline baggage fees, now expect a fee when paying by credit card. Small business can now reward themselves, keep more of their hard-earned profit and have one less expense to worry about.
Coastal Payment Systems helps merchants determine which program and processing equipment is best for their type of business. With no upfront costs, CPS supplies hardware from payment processing terminals to complete point of sale systems and ecommerce. All programed to eliminate the costs of accepting credit cards. Remember the satisfaction of opening your business and taking the first credit card payment. Only to then see merchant fees taken from your account month after month. Now think about taking your first credit card payment again, this time without any fees taken from your sale. Start rewarding yourself and your business today.