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credit card transaction fees

Surcharging Made Simple

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The Truth About Credit Card Transaction Fees

Lowering operating costs through surcharging sounds simple at first: collecting an additional fee for a credit card transaction to buffer that expense. Unfortunately, surcharging is one the most complicated practices in an already convoluted merchant services industry.

Basys makes it easier. We understand your unique struggles and provide innovative payment solutions to save you time and money.

Let Basys Help You Set Up Your Surcharge Program

Expert Guidance
We have over two decades of experience assisting businesses with their operational needs.
Recover Losses
We assist you in meeting the necessary criteria to transfer credit card transaction fees to your consumers.
Find Alternatives
For businesses on tight profit margins, we provide a range of alternative industry-standard strategies to consider.
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Recover Your Credit Card Fees

Basys can help you understand the rules, regulations and processes

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How Credit Card Surcharges Work

Businesses running on a tight margin—or who process many small transactions—benefit most from a surcharge.

Surcharges are only applicable to credit card transactions. You must notify the card brands 30 days before implementing the surcharge, and you must also display signage disclosing the surcharge at your point of entry and point of sale.

It is important to recognize that many customers may not react positively to the surcharge, and you’ll need to evaluate whether surcharging aligns with the overall goals and profitability of your business.

Frequently Asked Questions

Surcharging first became legal as the result of a claim brought by U.S. merchants against Visa and MasterCard. As of January 27, 2013, card associations must permit merchants to add surcharges to certain credit card transactions. That means the credit card brands (Visa, MasterCard and others) cannot forbid surcharging in their guidelines. However, they can still restrict surcharging to certain parameters.

Following the 2013 ruling, many states stepped in to outlaw surcharging. As of early 2021, the following states are enforcing bans on credit card surcharging on the grounds that it’s unfair to consumers:

  • Connecticut
  • Massachusetts

*If your business is considering imposing a surcharge on credit cards and you’re unsure of the legality of the practice in your state, check with a business lawyer or your state’s Attorney General.

To determine what your surcharge rate should be, first you’ll need to determine your “effective rate.”

Your effective rate is equivalent to your total monthly fees divided by your total processing volume.

Knowing your effective rate will help you determine the fees or discounts you should implement. Most cash discount and surcharge programs have fixed rates around 3.5% to 4%. If your effective rate is lower than the fixed rate offered, you will overcharge your customers with a surcharge program.

Keep in mind that the surcharge fee cannot be greater than the costs you incur by accepting a given brand’s credit cards. There are also different surcharge caps you can implement. Talk to your Basys representative and we can guide you through the options and exceptions.

As you look at ways to pass credit card transaction fees to the consumer, having a POS system that supports surcharging helps to easily implement this process—and potentially save thousands of dollars a year. Supported equipment for surcharging includes:

  • iQ Pro
  • Clover Station Duo
  • Clover Station Solo
  • Clover Mini
  • Clover Flex
  • Clover Go (w/ Gen 2 app)

As a reminder, you cannot enable surcharging on debit card transactions.