Surcharging Gaining Momentum in 2023

The practice of passing along credit card fees to customers in the form of a fully transparent surcharge is on the rise. Surcharging offers advantages to both merchants and customers, as an effective tool for lowering business overhead while also helping keep consumer price inflation in check. That’s critically important in these financially challenging times.

A Growing Trend

Nearly all states now allow credit card surcharging. That follows recent court rulings including one at the end of last year when the Attorney General of Oklahoma declared laws against surcharging unconstitutional. Merchants battled for years to overturn laws that protected higher profits on Wall Street by undermining those of America’s small businesses. Credit card surcharging allows them to fight back and win, as it targets the hefty fees that major credit card processing companies like VISA and MasterCard impose upon merchants.

Easy and Transparent

Instead of baking the cost of merchant fees into the price everyone pays, surcharging only passes credit card fees along to consumers who choose to pay by credit card. They can avoid that extra fee if they pay by cash, with a debit card, or by some other means besides a credit card. Visible signage also ensures that consumers are fully informed and understand their options when a merchant uses surcharging. Automated surcharging software that’s a simple card terminal plug-in technology detects when a credit card is used, and instantly calculates the surcharge. That amount is clearly disclosed on the customer’s receipt.

Fair Pricing that is Anti-Inflationary

The CEO of CardX, a company offering that kind of software, discussed the surcharging trend with the financial industry publication American Banker. He said merchants using CardX collectively save more than $24 million per year. That’s because they pay zero credit card fees. Many consumer advocates also support surcharging because it levels the playing field and ensures fair pricing. Merchants typically set higher prices for goods and services to recoup revenue they lose through card fees. That equals price inflation. Or they refuse to accept credit cards, putting an unnecessary burden of inconvenience on the consumer. But when surcharging is used consumers have more choice and control, without the price hikes.

Traditional Utility Company Surcharging

But although many people view surcharging as a new trend, government agencies, utility companies, and phone carriers have been surcharging for decades. A utility bill or phone bill, for example, will show the base price for monthly services. But there are often as many as a half dozen other fees and service charges added, that may have no detailed explanation. These surcharges are not optional and add up to significant additional costs. That’s why many government agencies and municipalities are adopting surcharging as it gains momentum, to facilitate “flex-rate” pricing models that promote transparency and fairness.

Flex-Rate Pricing for Government Agencies 

In the past they charged a flat fee tacked onto property taxes, vehicle registrations, court costs, and other taxpayer receivables. But that was unfair to those who don’t pay by credit card. Now they see surcharging as a more equitable system that doesn’t penalize payers by forcing them to unwittingly subsidize the cost of processing fees. Perhaps utilities will also respond to criticism regarding their own billing practices, and take advantage of zero cost credit card fee processing for the sake of fair pricing and full disclosure.