What Is a Surcharge? A surcharge is an additional charge, fee, or tax that is added to the cost of a good or service beyond the initially quoted price. A surcharge is often added to an existing tax and is not included in the stated price of the good or service.
“Dear customer, instead of raising our prices, we now include a X% surcharge fee—which you will see on your receipt—to cover the increased cost of credit card acceptance we must pay. Payments made with cash or debit card won't be surcharged. Thank you for your understanding!”
The fee is typically a fixed amount or a percentage of the sale. Convenience fees are charged by businesses to cover the cost they pay to payment processing companies for when a customer pays by credit card. A convenience fee is different from a surcharge, which is a charge simply for just using a credit card.
Most often, fees are the payment one makes in return for service, such as mowing a lawn or drafting a will. Sometimes more than one fee is charged for a service. Governments (local and federal) charge fees for licenses, such as a driver's license or a passport.
Examples of surcharge in a Sentence
Verb contends that with the present tax structure, the state's lower-income residents are being surcharged and the wealthiest residents are getting off too lightly Noun The airline has added a $20 fuel surcharge on all international flights.
A surcharge is not a convenience fee. A convenience fee is levied by a merchant for offering customers the privilege of paying with an alternative non-standard payment method. Merchants can process convenience fees in all 50 states. A surcharge is levied by a merchant for customer purchases made with a credit card.
Show clients a detailed breakdown of fees and services to demonstrate the value you're providing. Outline your fees and expenses clearly and completely. Highlighting the specific benefits and outcomes they can expect from your services will reassure them that their money is well spent.
Businesses must clearly and conspicuously notify customers about convenience fees before the transaction is completed. This can be done through ample signage in-store, clear messaging during online checkout, or verbally over the phone.
A service charge is collected to pay for services related to the primary product or service being purchased. Service charges are different from tips, which are paid at the discretion of the customer after receiving a service.
For example, you may see a sign that says there's a 3% charge for credit card purchases. That translates to paying $25.75 instead of $25 when using a credit card. A credit card surcharge is generally calculated as a percentage of the transaction amount and can be as high as 4% of the transaction.
Use cash where you can
The easiest way to avoid card surcharges is to pay by cash. While businesses can charge a surcharge for paying by debit or credit cards, they can't charge a surcharge for paying by cash.
Most credit card companies require merchants to disclose credit card surcharges in online transactions, on a sign at the store's point of entry and point of sale, and on the receipt.
Q. Am I required to disclose the surcharge to my customers? Yes. U.S. merchants that surcharge must disclose the surcharge dollar amount on every receipt.
While a surcharge is part of what must be paid, an upcharge is not always unexpected, and usually can be declined by rejecting the additional service or the suggested upgrade, albeit receiving less.
Under the surcharging standard, customers using Visa, Mastercard, EFTPOS and American Express cards can't be charged an amount higher than the cost of accepting that particular card scheme.
A standard wording could be: “A credit card convenience fee of [percentage or flat amount] will be applied to all transactions.
A good price increase notice is clear, respectful, and transparent. Start by explaining the reason for the change, like rising costs or adjustments to improve service quality. Clearly state the new price and when it will take effect, and thank the client for their continued partnership.
What are transaction fees? Transaction fees are the expenses that businesses need to pay to their payment service provider every time the provider processes an electronic payment for a Card Present or Card Not Present transaction. Transaction fees can vary slightly, depending on the payment service provider.
Offer exceptional service: Since customers know they are paying a service charge, their expectations for service quality will likely increase. Focus on providing exceptional service to justify the added cost and enhance guest satisfaction.
If most of your customers pay with a credit card, a surcharge effectively increases your prices, putting your business at a competitive disadvantage. For businesses that compete in a price-sensitive market, surcharging can hurt your bottom line because customers may decide to buy from your competition.
There are a few ways of legally passing on credit card fees to customers. Some are direct, and some are indirect. Adding a surcharge to cover the credit card fee is the more direct method while incentivizing cash payments is indirect.
To avoid a credit card surcharge, you can pay with alternative methods such as cash, debit cards, or mobile payment apps. Some businesses also offer discounts for non-credit card payments, providing an incentive to choose other payment options that help avoid credit card surcharge.