How to Get Started with Surcharging

February 28th, 10:28 AM
By: Lorde Astor West

Surcharging why now...

For years merchants have had the ability to transfer the cost of accepting credit cards to consumers. This is thanks to a 2013 landmark class action settlement giving some merchants the ability to surcharge credit card customers in certain situations. The new rules allow merchants to recoup the cost of accepting credit cards up to a maximum of 4% where it is not prohibited by state law.

Not many merchants have taken advantage of their ability to surcharge; until recently, most merchants felt that the convenience of accepting credit cards outweighed the cost.

However, merchant sentiments are starting to shift as rewards cards, which cost merchants between 30% and 40% more to process, have increased significantly in just a few short years. [TSYS Reports | 68% of consumers rated rewards as one of the most attractive features on their preferred credit card, an increase from 59% in 2016] Merchants are no longer able to absorb these increased costs prompting them to look for ways to maximize profits while continuing to stay competitive. 

Getting started

When asked, overwhelmingly merchants explain that the number one reason why they do not surcharge is that they are confused about the rules. While the rules are straight forward implementation can be complex if not managed correctly or automated by sophisticated technology such RECOUP a Predictive Surcharging App from SCRATCH. No one wants to be slapped with fines that can be huge depending on the card brand. 

The Rules

The rules for surcharging are relatively clear. 

  1.  There is no surcharging Debit or Prepaid cards even if the customer chooses to run the transaction as credit. 
  2. Merchants in states where surcharging is prohibited, must not surcharge consumers. 
  3. You must disclose to card brand and acquiring bank 30 days prior to surcharging. 
  4. Surcharging disclosures must be posted in accordance with card brand rules
  5. The surcharge must be no greater than the merchant's average discount rate for the previous 30 days or 12 months at the merchants option.
  6. The Merchant must adhere to non discrimination provisions
  7. The Merchant must adhere to no steering rules
  8. The Merchant must adhere to level playing field rules

What you should consider before implementing your program

Surcharging, while straightforward, is packed full of complexities if not fully understood could result in serious fines. 

  1. Fully understand compliance rules
  2. Define and adopt clear guidelines as well as Acceptance Policies & Procedures
  3. Evaluate the cost of implementing your surcharge program, including the opportunity costs involved
  4. Understand the nature of the Interchange Fee system and ensure that you are doing everything in your control to face the lowest Interchange Fees possible
  5. Negotiate lower processing fees with your Merchant Service Provider
  6. Create "Best Practices" for the treatment of vendors and consumers
  7. Map out credit card acceptance logistics 
  8. PCI policies and considerations
  9. Review your program with your CPA and tax attorney to negate any tax violations and mitigate increased tax liability

This is where SCRATCH comes in

Our platform provides transparent surcharging and a modern interface with simple inputs that mirror the merchant’s processor experience. SCRATCH goes much further than just providing the technology to help merchants recoup credit card acceptance fees. Our experienced team will help merchants of any size create acceptance policies, logistic strategies, and best practices that maximize surcharging success while ensuring compliance. 

If you are considering adding surcharging to your revenue optimization strategy, we can help. 



Lorde Astor West

 SCRATCH | Founder & CEO

Astor is a pioneer of the modern Web and Arizona native. Since 2003 she has been helping businesses keep what they earn by developing technologies that streamline and automate complex processes.  Astor has created an eclectic portfolio of innovative brands that include Cloud, FinTech, Data, Media, and E-commerce. To date Astor has developed a cloud rapid development framework, several platforms, and countless cloud Apps.  Astor is a mother, grandmother, and wife who loves building innovative technologies that help businesses keep what they earn, walking her rescues and promoting local businesses. 

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