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Accepting credit cards is essential for doing business today, but the service fees from card
processors can cut into already slim profit margins. There are two legal and effective ways
to pass credit card fees on to customers: credit card surcharges and cash discount
programs. Each has different rules, benefits, and limitations.
Here’s a breakdown of how they work—and how to decide which is right for your business.
Option 1: Credit Card Surcharge
A credit card surcharge is an extra fee added to a sale only when the customer pays with a
credit card. The purpose is to cover the cost of processing the card transaction. If a
customer chooses to pay with a credit card, a fee (up to 3%) is added at checkout. The
surcharge must be clearly disclosed on signage, invoices, and receipts.
Note: A credit card surcharge only applies to credit cards. You cannot add a surcharge for
debit card payments, even if they are processed as credit. The surcharge also cannot exceed
your actual processing cost.
Pros:
- Lets you keep your prices stable while recouping card processing fees.
- Fully supported by card networks (with proper compliance and notification).
Cons:
- Some customers may react negatively to the added fee.
- There are more regulatory steps and legal limits to follow.
Option 2: Cash Discount Program
A cash discount program flips the approach: instead of adding a fee for card payments, you
build the processing cost into your posted prices—then offer a discount to customers who
pay with cash, check, or debit.
With a cash discount program, you set your prices to include the credit card fee (up to 4%).
At checkout, customers paying with cash or check receive a discount equal to the built-in
fee. Receipts reflect either the full (card-inclusive) price or the discounted total.
This model is legal in all 50 states, and no registration with card networks is required.
However, you must clearly display signage explaining the discount and ensure receipts
reflect the transaction accurately.
Pros:
- Legal everywhere in the U.S.
- Allows you to recover up to 4% in processing costs.
- Applies to both credit and debit cards without violating card rules.
Cons:
- May require pricing adjustments and POS reconfiguration.
- Customers may need clarification if the policy isn't explained clearly.
Cons to Either Program
Passing credit card fees to customers can help protect your margins—but it’s not without
risks. If you choose to implement either approach, be sure to do so transparently, legally,
and consistently. With the right signage and communication, most customers understand
and accept a small added cost or a discount for using cash.
Which Option Should You Choose?
• Choose a surcharge if you want to keep your listed prices unchanged and only add fees to
credit card transactions (check your state’s laws first).
• Choose a cash discount if you want a simpler, more flexible method that works with both
credit and debit cards, and avoids regulatory registration or fee caps.
Getting Started
If you're ready to stop absorbing credit card fees, the first step is to reach out to your
current credit card processor. Ask if they offer a compliant surcharge or cash discount
program and what setup is required.
If your processor doesn’t support these options—or charges extra for them—you may want
to consider switching to a provider that specializes in fee recovery programs, such as AXE
Payments or other surcharge-compliant services. These companies typically handle signage,
equipment setup, and compliance, making the transition smoother.
Either way, the goal is the same: stop losing money to credit card fees—without alienating
your customers.
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