Thursday, July 8, 2021

Should you Surcharge your customers when they use a charge card?


To Surcharge or not to Surcharge, that is the question!

We have encountered quite a few customers recently that want to start a surcharge program for the credit card sales. What happens is a merchant services salesperson will come in or call you business and offer you a free credit card program. If you just sign up with them you can accept cards for free. Well the truth is a little different from that. These programs charge your customers instead of you. Not only that, but they are charging your customers far more than then they would ever charge you. As an example maybe you have a competitive deal for your merchant services and let's say you are being charged interchange plus 10 basis points. That is a good deal, so when they offer the free program they charge your customers 300 or 400 basis points which of course is 3% to 4% on top of what you are collecting. The problem with this is the merchant services sales person would never get away with charging you that, but when you sign up for a program like that you are letting them gouge your customers. Why is the merchant services sales person doing that? Because they make enormous commissions on a program like that. Probably ten times more than they would make giving you a fair deal.

Is there blowback from operating a Surcharge Program?

There are other pitfalls to these programs as well. As an example, take me. I will not go to a store that charges a surcharge. I'm sure I'm not the only one that feels that way. Who know, maybe it will becaome the new normal and I will be forced to but not today! 


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