Is Credit Card Surcharging Right for Your Industry?

As credit card surcharging becomes more widespread, many businesses wonder if it’s suitable for them. Surcharging offers a number of compelling benefits, and how those can be leveraged may depend on a company’s industry or profession.

Government and Education Savings

Government agencies and public educational institutions, for example, are in the unique position of being accountable to taxpayers for responsible financial stewardship. But during a recession, when tax revenues are sharply diminished, they face severe financial challenges. For them, surcharging is a simple, automatic way to retain vital revenue otherwise spent on hefty credit card processing fees. These agencies and institutions typically charge a fixed service charge on every invoice to help recoup those fees. However, that is unfair to those who do not pay their invoices by credit card. That inequity is eliminated by surcharging, in a way that is fully transparent and fair. Only those who select a credit card payment option are subject to the surcharge. Those who wish to avoid it can pay by other means. In that way, surcharging can build public trust. Private schools, colleges, and universities can also use surcharging to ensure equity and retain revenue.

Building Contractors

Forbes Magazine recently reported that surcharging is especially appropriate for businesses that invoice for large dollar amounts. Contractors fall into that category, whether they build new homes and architectural additions; remodel and renovate; or perform routine repairs and maintenance. General contractors as well as building trade professionals such as electricians, plumbers, landscape architects, and roofing companies can shorten collection times and improve cash flow by accepting credit cards. But the painful trade-off is hefty credit card processing fees. Surcharging cures that adverse impact by guaranteeing that contractors collect 100 percent of every credit card payment.

Automotive Professionals

Businesses providing automotive services and repairs are also a prime beneficiary of surcharging. Customers usually pay for auto expenses with a credit card. That’s especially true for higher ticket items like major repairs. Each time an auto shop rings up a transaction for a cardholder, however, they lose a few cents on the dollar by paying processors like Visa and MasterCard. That’s net income lost day-in, day-out, all year long. By simply establishing a surcharging policy they can save all that money. Customers may still use debit cards for convenience, but debit card processing fees are much lower than credit card processing fees.

Service Industry Businesses

Businesses routinely raise prices for their services to compensate for the cost of credit card processing, making those businesses less competitive and triggering consumer price inflation. Service industry businesses also often operate on thin profit margins and processing fees are one of their highest monthly expenses. Surcharging can strengthen sensitive, vulnerable profit margins and support financial success by reducing credit card processing fees to zero. Because the service industry accounts for approximately 70 percent of American commerce and 80 percent of private sector jobs, that’s good news for the entire economy.

The Bottom Line

Regardless of the industry, surcharging solves a variety of common problems that impact net revenues. But it can also enhance transparency and fairness to promote goodwill and customer loyalty. Those benefits can be invaluable, particularly in times of economic uncertainty and strained consumer, student, and government agency budgets.