Today more than ever consumers are using cashless payment options. But as a business, that means that you pay extra processing fees for every payment you receive.
In our economy, you are more than likely looking for a way to offset these costs. That’s where surcharges and convenient fees come in.
But what is a convenience fee exactly, and what’s the difference from a surcharge? We’ll answer that and more in this short guide. So get comfortable and keep reading with us!
What’s a Surcharge?
A surcharge is a fee that is imposed every time you use a certain payment method, like credit cards. This is essentially charging the consumer for the convenience of using their credit cards. This is one reason why this option is often looked down upon by credit card issuers.
In certain states, surcharges are severely limited by law. Others are always negotiating surcharge laws. It is also unacceptable to require a minimum purchase of more than $10 to use a credit card. You must notify the card issuers that you plan to charge a fee and how much.
While this can negate some of your processing costs, there is another solution to consider: a convenience fee.
What’s a Convenience Fee?
A convenience fee offsets the high cost of payment processing fees, making it a popular option for businesses.
The main difference between a convenience fee and a surcharge is that a convenience fee is charged regardless of the type of tender used for the purchase.
These fees can be a set amount for all purchases or it can be a percentage of the consumer’s total bill. Most businesses set this fee at either two or three percent of the total bill. Keep in mind any surcharge or convenience fee you impose on your customers must be disclosed before charging them.
Convenience fees are regulated by both legislation and by card issuers. So there are some limitations on what you can charge a convenience fee for, and for how much.
Which Should I Choose?
There’s no clear answer, as the better choice should be based on your company’s needs.
To choose wisely, you’ll need to assess how many card purchases you typically process vs the number of cash transactions. It would also be beneficial to look into your state’s regulations on surcharges and convenience fees.
Be sure to go over your records before making either choice. In both cases, you will have to notify the card issuer or your credit card processor before you can start charging your customers these fees. Transparency is important, as you don’t want your customers being charged with deceptive fees.
Learn More With Us
So, then, what is a convenience fee? It’s simply a fee to help you offset credit card processing fees.
We hope this short guide was helpful in guiding you to offsetting some of your business fees. We have many other great articles like this on our blog be sure to check those out too.
Also, don’t forget to share this article with your friends and family on social media!