Pros & Cons

For many merchants, the cost of accepting credit cards has become a high operating cost. Many merchants might find relief in taking advantage of an increasingly popular option called credit card surcharging. Credit card surcharging enables businesses to pass on the fee when customers choose to use credit cards for their convenience or rewards.

Business-to-business merchants — most of which will now be forced to sell online or via phone due to stay-at-home advisories — will be disproportionately affected because the interchange fees for “card not present” transactions on commercial cards are set to increase again. 

Surcharging has the potential to add up to 3.5% to a merchant’s bottom line. 

Where Surcharging Works

In the 46 states where surcharging is permitted, it has proven to be a beneficial model for merchants that have high average tickets and low gross margins and whose customers primarily use credit cards compared to debit cards — such businesses include insurance, industrials, technology, professional services including law, medical and accounting firms, as well as residential and commercial contractors.

Surcharging is not a fit for merchants with a small average sale amount, such as a convenience store. On a $2.00 sale, for example, the surcharge couldn’t exceed $0.08, and therefore is unlikely to cover interchange costs. Surcharging can also introduce extra steps for restaurants that use tip adjustments. Outside of these exceptions, however, surcharging is a strong option for many businesses.

Because surcharging allows merchants to pass on the fee, businesses that once could not afford to accept credit cards can now offer that option alongside cash or debit. 

Despite all the benefits, many merchants still aren’t aware surcharging is an option, or believe it to be too difficult to meet all the compliance needs themselves. To pass on their credit card fees, businesses must comply with a long list of rules set by card brands like Visa and Mastercard.

How Merchants Can Make Surcharging Work For Them

Fortunately, there are already payment solution providers such as ours here at Plug’n Pay that automatically comply with all the rules, so you don’t have to navigate the nuances themselves.

We will handle all the details of implementation, beginning with notifying card brands and the merchant’s acquiring bank and working with internal technology and compliance teams to align systems. Another benefit of using Plug’n Pay is that we ensure each transaction adheres to the card brands’ rules and certain states’ specific regulations.

Following these rules and regulations is critical. 

We emphasize the need to set up surcharging transparently — as a fully compliant partner we will also provide the required disclosure and clear communication on the online payment form, so customers are aware of the surcharge for credit card payments as well as no-fee payment options.

In this crisis, businesses are seeing their customers rely on credit more heavily than ever before, which enables customers to finance their purchases, but also drives up processing costs when businesses can least afford it.

Surcharging allows merchants to continue to offer credit card options while eliminating its cost.

For more information on how you can get started contact us at