Would Your Company Benefit from Surcharging?

Posted on May 24, 2019 at 18:52 PM

Should I Surcharge

eCommerce is growing fast. New merchants are selling their goods and services online every day. Are credit card processing fees holding your company back?

Whenever a customer uses a credit card to purchase something from a merchant, the merchant must pay a processing fee to the associated credit card company and bank.

With more and more people using credit cards as their main payment method, rising credit card processing fees are becoming tough on merchants because they tighten margins and decrease profits. These fees are usually between 1-4% of the total sale.

Companies that have a higher risk of chargebacks (airlines, ticket vendors, travel arrangement services, etc.) often pay an even higher fee.

New laws now allow companies to pass credit card processing fees onto their customers by way of a credit card transaction fee, referred to a surcharge.


Who Covers the Cost of Credit Card Rewards/Points?

Without surcharging, the burdon falls to merchants. A cardholder pays nothing to own and use a credit card unless she’s charged interest by the bank. There are no costs to the bank who issues the card. Credit card companies also pay nothing to the cardholder or the bank.

Each time a card is used in a purchase, the company who processes the card must pay a transaction processing fee to the credit card company of up to 4% of the total sale. This fee is designed to offset the bank’s expense when they offer a credit card.

In the past, credit card processing fees were small enough that a merchant would gladly pay it for the convenience of being able to accept credit cards.

Unfortunately, credit card fees have been steadily rising. In a study commissioned by InterPayments, 91% of merchants agreed that credit card processing fees have gone up in the last 5 years. 70% say the amount their company pays in fees is now higher than they planned for.


Fees Are Rising


Credit card processing fees are especially high for reward and specialty cards–the ones that offer miles or cash back. Services like Square, where a credit card must be present, carry fees of around 2.5%.

If your business is online and uses card-not-present transactions where the card number must be entered, fees are more like 3.5% on average.

The Demand for Surcharging is on The Rise

High processing fees have created a demand for surcharging: the ability to pass credit card processing fees back to the customer. Surcharging became officially legal at the federal level following a class action settlement in January 2013 class action settlement in January 2013. Multiple judicial decisions, including one made by the Supreme Court, established that most laws banning surcharging are a violation of the First Amendment.

As of 2019, credit card surcharges are legal in 44 states. The following states are the only states that still have surcharging bans: Connecticut, Colorado, Kansas, Maine, Massachusetts, and Oklahoma. However, this doesn’t mean online merchants in those states can’t implement a surcharge. In many cases, eCommerce and online merchants in those states can still legally surcharge. For instance, selling to an online customer outside those perspective states is acceptable.

InterPayments’s world-class surcharging technology will make those determinations for you automatically while continuing to adhere to the 60+ compliance regulations. Some of these requirements include:

  • Credit card companies require merchants to display a notice of the surcharge at the in-store and online points of sale.
  • A merchant cannot profit from transaction fees. Not even one fraction of a cent. This is why it is so important to know the exact fee of a particular card and there are over 600,000 different card types in circulation.
  • Credit card companies require written notification of “intent to surcharge” 30 days prior to imposing any surcharges.
  • Credit card surcharge fees must appear on every receipt in an individual line item.
  • Rules and Regulations
  • If a merchant provides a refund for an item and a surcharge was applied to the purchase, the transaction fee must also be refunded.


These extensive laws and regulations have, until now, made it extremely difficult for companies to surcharge and remain in compliance. Every credit card is unique and so too is the surcharge that can be legally applied.

For Example: A Mastercard Platinum Rewards Card processing fee differs from a Mastercard Gold Card, which differs from a Visa Gold Card.

Because a surcharge is a percentage of a total sale, the amount a company can surcharge varies. A flat fee would put you out of compliance and you’d be subject to fines or worse, lose the ability to take credit cards all together.

Guaranteed Compliance with InterPayments

InterPayments is a simple software integration that levels the playing field for eCommerce merchants selling both hard and soft goods. By saving just 3% on each credit card transaction, an average merchant with a net profit of 10% can add up to 30% to her bottom line.

What InterPayments offers:

  • No out-of-pocket cost
  • No up-front fees
  • Agnostic integration with your current processor
  • No special hardware required
  • No impact on PCI compliance
  • Easy to turn on…and off
  • No maintenance necessary
  • 100% compliant at all times
  • And so much more…


If your company is margin sensitive, speaking with one of our surcharging specialists could very-well be the smartest business decision you make this year.

For more information or to speak with one of our expert Surcharging Specialists call 602-935-4509.

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