Treating the fees as a cost of sales (also known as the cost of goods sold) would put them at the top section of your income statement. This means the fees will be deducted to arrive at your gross margin. Therefore, the formula would be: Income – Cost of Goods Sold – Credit Card Fees = Gross Profit.
Enter credit card statements or charges as an accounts payable item as soon as the paperwork comes in. The sooner you put these expenses into your system, the more information that management will have about what is owed and when.
If you're wondering if it is legal to charge credit card fees, the short answer is yes in most states. The practice of surcharging was largely outlawed for several decades until 2013 when a class action lawsuit permitted merchants in several U.S. states to implement surcharges in their businesses.
Basically, surcharging is a way for merchants to pass on swipe/credit card fees on to their customers (which can include fees like interchange fees and assessment fees). That means if a customer wants to make a credit card purchase, they'll be charged an additional fee to cover the payment processing costs.
A standard wording could be: “A credit card convenience fee of [percentage or flat amount] will be applied to all transactions. This fee is charged to cover the processing costs associated with credit card payments. Please note that this fee does not apply to other payment forms such as cash or debit cards.”
Here are three scripts you may want to use to notify your customers about an upcoming convenience fee: In-person: “There will be a $3 flat fee for online payments and credit cards. Would you like to use cash or another form of payment?” Online: “By selecting 'credit,' you agree to pay a $3 convenience fee.”
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.
Credit card fees are not deductible for individuals and are deductible for businesses. Businesses can deduct all credit card fees as well as finance charges. Businesses are eligible to deduct credit or debit card processing fees associated with paying taxes, but individuals are not.
When you pay or receive credit card processing fees, do not record them as part of your sales revenue. Instead, credit card accounting principles require that you list them as expenses.
Businesses cannot impose any surcharge for using the following methods of payment: consumer credit cards, debit cards or charge cards. similar payment methods that are not card-based (for example, mobile phone-based payment methods) electronic payment services (for example, PayPal)
We impose a surcharge of ____________% on the transaction amount on Visa credit card products, which is not greater than our cost of acceptance. We do not surcharge Visa debit cards.
Post signage that explains your policy at the checkout counter, and display any credit card fees as a line item on your customer's receipt. Not only is this a legal requirement in many states, but it will build trust between you and your customers and reduce confusion.
Merchants can impose a surcharge as long as it doesn't exceed the cost of the merchant's processing fee. There is no statute on discounts for different payment methods. Merchants are prohibited from imposing surcharges on customers who choose to use a credit card instead of cash or other available payments.
Whether accepting payments online or in person, banners, posters, and other appropriate types of signage should inform customers that an extra fee, such as a surcharge, will be added (as a separate line item) to the final dollar amount of their credit card purchases.
If a business charges a payment surcharge, it must be able to prove the costs it is based on. If there is no way for a consumer to pay without paying a surcharge, the business must include the surcharge in the displayed price.
Add a line item for credit card surcharge to the invoice and add a standard amount to each invoice. Calculate to offset the 2.9% + $0.30 charge per invoice.
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.
There are legal options for passing on credit card fees to customers. Credit card surcharging and cash discounting are the two main options for passing on fees. Adding a surcharge to credit card payments is not legal in every state, but offering a cash discount is.
Pass-through fees are a combination of interchange fees, assessment fees and payment processor fees that can be bundled together or itemized on the monthly statement and charged to the merchant—and depending on the payment processor sometimes with an additional service fee added.