Why Surcharge is a bad move for small businesses – and what to do instead

I belong to the CEO Pir Group, and I like to contact the leaders who are more on their journey. I work hard to keep my mouth shut and keep my ears open – because let’s be honest, they have more to teach me that I have to teach them. I love it too when they allowed me to record their conversation on Puld so that I could look at gold again later.

I used to think that most CEOs and business owners likewise approach their development: learn from them ahead of them. But recently, I am starting to be surprised.

Why? Because right now, I’m looking at a surcharge frenzy. Small and medium traders are racing to add additional fees to consumers’ bills to cover credit card processing costs. Yet a big player is not doing this. Not apple. No Walmart. Not Amazon. Not a target. No Costco. None of them.

So, what do they know that others don’t?

Related: Is your credit card processor secretly spending you at a cost of luck? View these 5 red flags

What is surcharge (and why should you care)?

Surcharge means adding fees to checkout to cover the cost of paying users by credit card. It looks easy. But it is nothing to do with the rules of some states and card brand.

Each card has a set of its own rules of network (such as a visa, mastercard), and some states completely ban surcharges. Result? A regulatory dirt where a slip -ups can lead to fines, customer reactions or both.

Why do big players avoid it?

Large companies have an army of lawyers and compliance experts. They also use firms to reduce their fees without colliding with consumers. Most importantly – they understand the hidden dangers of surcharging:

Legal risks: Mustps can trigger fines from card networks or regulators. The penalties can exceed $ 10,000 per violation.

The net of the processor: If you are misrepresented by the wrongdoing, many merchant contracts allow processors to transfer your penalty to you. This means that you can kill twice.

Customer friction: Surcasters disturb consumers. Studies show that surprise fees lead to the rate of abandoning the cart and low return.

Typical: Big companies know that surcharge often costs more of lost business and legal headaches, which saves its fees.

What is your fee really?

Here is a cooker: If your merchant fees are climbing, perhaps the reason is not that the networks are hiking at their rates. Interchange fees – the core cost of processing – rarely stands in the last 15 years.

So where is the extra cost coming from?

• Flowed fees: This happens when a processor raises the actual value of fees, ie you charge 2.95 % when the exact fee is only 2.25 %.
• Made hidden fees
• Charging high discount rates, your discount rate should be fully revealed, should be broken, and at least between 2 and 7 twenty points, and if you are acting more than 10 million, 4-5 twenty points in a year, then millions in a year, more than 100 million, 2-3 points.
• Having discounts: Most businesses are unaware that they should refund their processing fee on return or empowered sales, and the credit card processor pockets the refund. This may increase significantly, with high amounts of return traders.

What do smart business owners do instead of

If you want to reduce credit card processing costs without surcharging dangers, here is the playbook:

Get a merchant processing audit: An independent audit can show printed fees, excessive markups and trash allegations. In my firm, we see that clients reduce their fees by 40 %. Several, many firms offer this service, so make sure your research and find a need for your needs that are in line with your needs.

Ask about interchange correction: This ensures that your transactions are eligible for the least possible rates under current rules – no customer is required to friction. Make sure they show you that your transactions are cleaning on the lowest interchange. Don’t just take their words for it.

If you Is necessary Surcharge, Get Help Experts: Work with a firm that can understand the rules of the state laws and all the rules of the card brand. Make sure you are properly registered and adhere to strict requirements – because an error can cost you a lot. Also, there are firms that will owe compliance and cover the penalty if you are fined.

Related: How to choose a credit card for your start

My last thoughts

How do you feel when you get surcharge? Business becomes faster every day, and I am sure that most people will do business where they feel desired and value, which is a lost art, but not everywhere.

Ready to break your income roof? Join us at the level, which is a conference for expensive business leaders to unlock new development opportunities.