Friday, 09 October 2020 13:58

Using Limits, Surcharges to Curtail Credit Card Processing Costs

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For shops looking to curtail expenses, reducing the fees they are paying when accepting customer payment might offer some opportunity.

Among nearly 400 shops responding to survey questions this summer about their customer payment policies, virtually all---96%---said they accept payment by credit card, and those shops report that a majority of their customers---58 percent, on average---pay by that method.


But perhaps surprisingly, three-quarters of those shops place no limit on the credit card transaction amount. By comparison, only 76% accept personal checks, and two in five of those shops place a dollar limit on checks they will accept.


About 5% of shops limit the credit card transaction to the amount of the customer’s deductible; about 8% have a $1,000 limit on credit card transactions; and about 9% have a $2,500 cap.


But while it is illegal in fewer than a dozen states for a merchant to surcharge customers paying by credit card as a way to recoup some of the processing fees the business pays, nearly three in four shops---72%---said they do not do so.


Among those charging a fee, 3% was the most common amount, charged by more than half of those with a fee). About 11% charge less than that, 19% charge between 3% and 4%, and 14% charge 4% or 5%.

Many of the shops charging fees do so only under certain conditions, such as when the dollar amount exceeds $500 or $1,000, or when payment is made by phone rather than in person.


“We charge 3% only if the customer received a check from the insurance company but deposited it and is then using a credit card to pay us,” a shop owner in Arizona said, a policy echoed by about one in six of the shops with credit card surcharges.


The survey found there clearly is some confusion within the industry about which states prohibit surcharges; a shop owner in Missouri, for example, thought it was illegal in his state---it isn’t, and shops in California, Florida, New York, Oklahoma and Texas said they have credit card surcharges, which may not comply with those states’ regulations.


An article on Bankrate.com offers a good summary of state regulations on credit card surcharges.