PASSING ALONG CREDIT CARD FEES
How to charge credit card fees and keep loyal customers
Surcharging options have become an increasingly utilized cost reduction tool for small businesses over the last few years. However, passing along credit card fees to customers is a risky strategy, as many customers openly dislike the practice. As processing rates steadily increase, business owners find themselves in a tough spot. Either:
- Surcharge & risk losing customers.
- Don’t surcharge & deal with rising processing costs.
For some businesses, this isn’t a problem; their business model might allow for wider profit margins that don’t involve such a difficult binary. But on the other hand, many small businesses operate off much smaller margins, making surcharging a highly attractive option.
This article provides some helpful suggestions for small businesses to implement supercharging while keeping a good relationship with their customers, including:
- Clear messaging
- Promotions & specials
A clear message develops mutual understanding
Customers are informed via the card terminal display when conducting a surcharge transaction. Business owners dictate this notification, allowing them to contextualize surcharging as an opportunity to help small businesses. These signs should also be available at the store’s entry, so customers know about surcharging before shopping. This can be done in a couple of ways, including:
“To reduce operational costs, we impose a _% surcharge on transaction amounts for Visa cards, which is not greater than the cost of acceptance. We do not surcharge Visa cards.”
“We impose a _% surcharge on transaction amounts for Visa cards, which is not greater than the cost of acceptance. We do not surcharge Visa cards.”
Customizing your messages allows you to present surcharging as less of an inconvenience for customers and more as a way to grow the customer-company relationship. By letting customers know their role in keeping your lights on, they are more likely to see the additional charge in a more positive light. However you choose to present that message, the fact that it is being presented honestly is more likely to make customers permissive of the practice.
Use special promotions to draw in customers
Customers don’t like surcharging; however you present it, there is a real danger that they could choose to leave. Some of the money you are saving with surcharging should go back to customers in the form of regular specials and promotions.
Choosing the right discount is not a simple process; however, it requires a deep understanding of your customers’ preferences. To implement these properly, we suggest utilizing the data analytics programs on your POS to identify your:
When you have a hot-button item, use it to your advantage. For example, running a special on your biggest sellers drives customers through your doors and gives them a reason to overlook surcharging.
Do most of your customers come in during the morning, afternoon, evening, etc.? Some businesses run specials encouraging people to come in at a certain time for a special discount (i.e., “10% off between 2 pm and 4 pm) to drive business.
The downside here is obvious; offering these promotions cuts away from whatever savings surcharging gives you. In this sense, it requires much number-crunching to find specials that attract customer attention while ultimately saving you money. This can be difficult, but having a comprehensive data analytics stack (as well as good accounting integration, if your POS offers that) can help you find that sweet spot.
Passing along credit card fees requires the right tools
Above all else, you should consider your customer’s reaction to surcharging; because many will react negatively to it, you need to be honest and upfront about it and offer customers additional reasons to stay with you. These strategies allow small businesses to reduce costs while still maintaining (and even growing) their customer base.
Implementing these features requires the right tools; POS providers like talech give you the foundation to offer surcharging to customers in addition to a host of additional features. Our systems excel at passing along credit card fees to customers using mobile software you can access through just a tablet. Reach out today about a free demo and to learn how we can become your trusted partner.