Everything You Need to Know About Product-Level Surcharging to Maximize Credit Card Cost Recovery

Surcharging is a legal and optimal way to protect merchants from the high cost of credit card acceptance. But traditional surcharging methods apply the same rate to every credit card product and don’t protect low-fee cardholders from the higher fees of reward cards. Some cardholders overpay to cover benefits they don’t even receive. Fortunately, the first-of-its-kind, fully compliant Product Level Surcharging (PLS) service from InterPayments charts a better way forward for credit card cost recovery.

What Is Product-Level Surcharging and How Does It Benefit Merchants?

A product-level surcharge is a fee that a merchant imposes on a specific type of credit card Product-level surcharging enables merchants to maximize fee recovery by surcharging credit card products at different rates for different card product types.

By tailoring the surcharge rate to each card type, cardholders pay a cost that is as close as possible to the fee of the card used, while still maximizing merchant fee recovery. This method allows merchants to ensure fair treatment of customers while covering costs more accurately and minimizing the cost of credit card acceptance.

What’s the Difference Between Product-Level Surcharging and Traditional Surcharging?

Merchants can choose from two surcharge fee options: product- or the traditional approach, known as brand-level surcharging. A brand-level surcharge applies one rate across all credit card products, simplifying surcharging for businesses that process a variety of cards. Because this is a more straightforward method of surcharging, it may be easier to explain to customers.

On the other hand, product-level surcharging compliantly applies a different surcharge rate to different classes of credit card products. This helps minimize the cost of acceptance when businesses have larger transaction values. Customers often consider product-level surcharging to be fairer because it’s based on the true cost of the credit card product. For example, lower-fee personal credit cards would be surcharged at a lower rate than high-fee reward cards.

Product- and brand-level surcharging are both useful methods that can help you recoup the maximum amount of credit card fees by only charging when fees are incurred. No matter which surcharging option you choose, it’s important to be transparent with customers and maintain compliance with credit card surcharge laws. Product-level surcharging remains compliant with card regulations because it still treats all card brands the same – for example, high-reward cards from Visa are treated the same as high-reward cards from American Express.

How Do I Know if Product-Level Surcharging is Right for my Business?

Product-level surcharging can be a great way to offset processing fees, but it isn’t for every business. This method is most suitable for merchants with interchange plus pricing and average order values greater than $600. Brand-level surcharging is more appropriate for merchants with flat-rate processing terms or average order values below $600.

In short, choose product-level surcharging when you desire to ensure the fairest treatment of your customers while using a more targeted way to minimize the cost of credit card acceptance. Choose brand-level surcharging if your primary goal is straightforward communication about surcharge amounts to your customers. InterPayments can help you make the best decision based on your fee recovery goals. 

How Does InterPayments’ Product-Level Surcharging Service Work?

The Product-Level Surcharging service from InterPayments delivers enhanced fairness and precision to merchants’ surcharge programs. With our Product-Level Surcharging service, InterPayments calculates the real-time cost of millions of different cards on every transaction. It then automatically calculates an accurate product-level surcharge that treats all card networks fairly and evaluates each transaction against all state, territory, province, and card network rules to maintain complete compliance.

Before providing the compliant product-level surcharge amount, InterPayments empowers merchants to impose voluntary rules to waive surcharges or discount them as required. Most importantly, our out of the box and customized surcharging solutions are backed by a contractual compliance guarantee with indemnification.

As the industry’s first and only fully compliant product-level surcharging service, the addition of Product-Level Surcharging to InterPayments’ suite surcharging solutions of marks a monumental step forward for the industry in pursuit of more equitable and accurate surcharging. To determine the best surcharging options for your business, reach out to us to learn more and talk to an expert.