Surcharging: Three Things You Need to Know

You enjoy the speed and security of a credit card transaction, not the processing fees that accompany it. That’s why many businesses have turned to surcharging. 

By surcharging, you share credit card processing fees with your customers, enabling you to maintain or expand card acceptance at a reduced cost. Regulations prohibit surcharging on prepaid cards or debit cards even if they’re run as credit. 

Thinking about adopting surcharging for your B2B? Here are three things you should know and consider before making surcharging a permanent piece of your payment strategy. 

1. Compliance is everything 

Card networks, individual states, and federal departments create and enforce surcharging rules and regulations. Staying compliant is essential but can be very tricky considering rates, card type eligibility, and disclosure requirements differ based on the location of the buyer and the seller. Non-compliance can result in serious consequences like fines, chargebacks, and even losing the ability to accept credit cards. These penalties hurt your bottom line and do irreparable damage to your company’s reputation. 

Transparency is crucial too. You must tell customers about surcharging prior to the transaction, and a surcharge must be listed as a separate line item at checkout and receipts: (1) signs explaining surcharging are required at the entrance and checkout counter at physical locations, (2) online businesses must alert customers to surcharging on the website’s checkout page, and (3) when making a sale over the phone verbal disclosure of the surcharge is a must. 

2.  Understand the meaning of surcharging 

Surcharging isn’t a way for your company to make more money. In fact, profiting by charging more than your processing costs is strictly prohibited. You’re not cutting expenses, raising prices, or negotiating lower processing fees. Rather, surcharging simply recoups most of the cost of accepting credit cards, a popular and secure form of payment in the B2B space. 

Surcharging is not the same as a convenience fee. A surcharge is a percentage of each transaction whenever a customer pays with a credit card where a convenience fee is a flat amount charged typically for using a non-standard payment channel. Convenience fees have their own set of requirements. 

Mislabeling or using surcharging incorrectly causes compliance problems and confuses customers. 

3. Preparation before adoption 

You need the proper systems in place to accurately calculate surcharging, track it, and separate it from your normal revenue. If you work or plan to work with a payment processor, choose one that helps guide you through what’s required to remain compliant.  

It’s also important to educate your team about surcharging, especially employees who work directly with customers. They’ll need to answer questions and explain what surcharging is and why you’ve decided to adopt it. Leaving your employees in the dark may mislead or confuse your customers, who may choose a competitor that doesn’t surcharge or that does so with clarity.

Bill360: Compliant Surcharging Process for B2B Companies 

If you choose to surcharge, Bill360 has the processes and expertise that can help you avoid hefty fines and other penalties because of non-compliance. 

Surcharging is not for everyone. However, if you would like to learn more about credit card surcharging and see if it fits your B2B company, schedule a demo today or visit our surcharging resources page.