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Credit Card Surcharge and What It Means To Small Businesses

  • October 29 2014

Today marks the first day companies can charge up to 4% of a purchase as a surcharge.  Although many large companies have shunned the idea of adding yet another expense to unsuspecting customers, many small businesses are contemplating making the extra money.  For the consumer, this means a sticker price of $100 could actually be a charge of $104!  And, that is not including any applicable sales taxes.
 
There are 40 states that have approved the surcharge.  That means there are 10 states that have actively blocked retailers from implementing the surcharge.  The 10 states that have banned credit card surcharges are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas.
 
The new credit card surcharge stems from the fees the credit card companies charge businesses for processing each credit card transaction.  Every time a consumer opts to use a credit card rather than cash, the retailer loses anywhere from 1% to 5% of the actual ticket price of the merchandise.  That means for a purchase of a $100 item, the vendor will only receive as little as $95 of that sale.  For a large retailer, they can make that up in volume.  But, for the smaller retailer, this is a large amount of money to lose for every sale.  This is just one of the things that makes it hard for the little guy to keep pace with their larger competitors.  The new credit card surcharge would allow retailers to reclaim that lost revenue.
 
The world’s largest retailer, Walmart, and other major retailers have already gone on record, stating they will not pass along the credit card processing fees to their customers, citing unfair charges should not be passed along.
 
If you are in one of the 40 states that allow the credit card surcharge, any retailer that wishes to, in fact, implement the surcharge, there must be a conspicuous sign announcing that surcharge and exactly what the surcharge is.  Then the consumer is informed and can make an educated decision to continue shopping at that business or not.

If you are a small business owner and want to create a plan to recoup your fees lost to credit cards charges.  Rebel Visions suggests creating a cash incentive program.  A good plan will inspire increased customer loyalty, recoup a good amount of lost fees, and maybe even increase your overall business.  Passing along the surcharge may actually hurt your business, even though there is a valid reason for doing so.