What are different ways to pass on transaction fees for accepting credit cards to customers?

Passing the Buck

Many small businesses have concerns about the transaction fees associated with accepting credit card payments, and that is what initially scares small business owners away from accepting credit cards. However, before you dismiss the idea, there are some options that you need to consider with regard to credit card acceptance.

The main costs of accepting credit cards are the credit card transaction fees and the cost of acquiring the equipment and software necessary to accept credit cards. Merchants always have the option of absorbing credit card transaction fees by increasing the price of their products. However, if you want your prices to remain competitive, then blatantly raising your prices could lose you customers.

One way to pass on a large part of your transaction fees to the customers is by charging a convenience fee. You could only allow credit card users to use their credit cards when there is a situation in which cash or checks cannot be used, such as payment via telephone or online. Customers paying with credit cards are receiving a benefit in that they can pay from the convenience of their own home and avoid waiting in line. By charging a �convenience fee� on credit cards, you are still giving your customers the option of avoiding the fee by selecting another payment method, such as mailing in a payment or making a payment in person.

Another way to pass on transaction fees is to offer your customers different payment options. By employing this method, credit card users won�t feel that they are the ones being singled out and penalized because you are not assigning fees to a means of payment, such as cash, check or credit card, but rather to different payment methods, such as phone, mail, or �walk-in� service.

However

It would be a violation of the merchant agreement with most credit card companies to charge a "convenience fee" or any other surcharge because the customer selected this method of payment. Any retailer found violating these rules may pay heavy fines or have their credit account suspended or terminated. For example, VisaUSA, Rules for Merchants, Page 10: "Always treat Visa transactions like any other transaction; that is, you may not impose any surcharge on a Visa transaction."