Understanding Surcharges

Surcharges - ricochet consignment software

It’s common knowledge that credit cards transaction fees are a thorn in the side of nearly every store owner.  Fluctuating bills can make budgeting difficult and can easily cut into profit margins, which is why many stores feel passing along a surcharge to their customers is the only avenue they have to help recoup their costs.  Although it may seem like common practice, surcharges come with a long list of stipulations and red tape.  Before considering adding surcharges in your business model, consider the following laws, restrictions and guidelines.  

There are 10 states and one U.S territory  that have anti surcharging laws in place. 

  • California
  • Florida
  • Kansas
  • Maine
  • New York
  • Oklahoma
  • Texas
  • Utah
  • Connecticut
  • Massachusetts
  • Puerto Rico

In states where surcharges are legal, they can only be applied to credit cards.  You cannot add surcharges to debit cards or prepaid cards.

If you plan on offering surcharges, you have to notify your merchant’s service and each card company in writing 30 days before implementing the surcharge. The only company that does not require a written notification is American Express.

You must have appropriate notice of surcharges both in store and online.  In store surcharges will require you to post both at your door and at the register.  Online sales will require that surcharges are posted at the checkout page.

Surcharges also need to be displayed as their own line item on receipts, and all surcharges collected need to be recorded in your software reporting or accounting.

Surcharges cannot exceed the cost of the credit card transaction, capping at 3%.  You cannot profit from surcharges, only recoup baseline costs.  If you own a store in Colorado then you can only charge up to 2%.

At the end of the day credit card transaction fees are the cost of doing business.  Businesses can alienate their customers, or lose them entirely to competitors who do not offer surcharges.  There are several alternatives.

Cash discount. Offering a 2-3% discount when cash is used is a great way to offset credit card use, but still ends up hurting stores.

Ricochet does offer Item Fees, or the ability to add an additional percentage or flat amount to the price of a consigned item that does not get shared with the consignor.  Although this feature is mostly used to help stores increase profit margins, it can be a great tool to help recoup transaction costs.