Eliminate Credit Card Fees with Surcharging
Surcharging lets you pass 100% of processing fees to credit card paying customers. You have the ability to apply a payment card surcharge (also known as a checkout fee), which is an additional fee added to a customer’s bill when a credit card is used for payment.
This lets you completely cover the cost of accepting credit cards!
What is Surcharging?
A payment card surcharge, also known as a checkout fee, is an additional fee that a merchant adds to a consumer’s bill when he or she uses a card for payment. Merchants in the U.S. and U.S. territories may add a surcharge to credit card transactions, subject to certain limitations. Adding a surcharge can save you thousand of dollars (or more!) annually while driving your costs on credit card transactions to zero. Merchants who choose to surcharge must follow consumer disclosure and other requirements.
Before choosing to surcharge, Visa suggests U.S. merchants may want to consider a number of factors, including:
- The potential impact on your customers’ experience
- What your competitors might be doing
- What information must be disclosed to your customers, and how
- Cost of credit cards and other forms of payment
How Dharma Supports Surcharging
Every Dharma account comes with our MX Merchant platform for easy transaction management and reporting. The MX Advantage option is also included with every account, and turns on surcharging for both card-present and card-not-present situations. Because it is part of the MX suite, surcharging via Advantage also is available in the QuickPay virtual terminal, MX Invoice for invoicing and recurring payments, and MX Quickbooks Sync, for reporting the surcharge in QB.
In a card-present environment, we also recommend the Dejavoo Z11 terminal, that integrates directly into MX Advantage for smooth, seamless transitions for your customers.
Some Caveats to Surcharging
- Surcharging is only allowed for credit card transactions. Surcharging is not allowed for debit card transactions or prepaid gift cards.
- There is a limit to how much you can surcharge. Your surcharge amount can be anywhere from 1% to 4%. Your surcharge amount cannot exceed 4%. Please keep in mind that your competitors may not be offering surcharging at all. So consider that when you are determining how much you will charge your customers. In no event can a merchant assess a surcharge above 4% of the base amount. Additionally, the merchant cannot assess a surcharge that is higher than their cost of card processing. (For most Dharma accounts, this would mean about 2% to 3%)
- Surcharges can only be applied to certain payment amounts. The payment or transaction amount must be at least $1.00.
- Surcharging is currently prohibited in Colorado (prohibition effective through 30 June 2022), Connecticut, Maine, Massachusetts, and Oklahoma.
- Registration with VISA and Mastercard is required: Merchants must notify Visa, Mastercard and Dharma at least 30 days in advance of beginning to surcharge. Simply alert the Dharma Support team that you are going to implement surcharging, and we will coordinate your registration.
- Surcharging needs to be disclosed. For face-to-face transactions: You must disclose the surcharge as a merchant fee and clearly alert consumers to the practice at the point of entry, the point of sale or transaction, and on every receipt. Signage is included with the merchant’s welcome kit. For Telephone orders: must provide verbal notification of surcharge and surcharge amount before sale is completed.
What is the Process for Surcharging?
U.S. merchants that intend to surcharge are required to:
- Notify Visa, Mastercard and your acquirer at least 30 days in advance of beginning to surcharge. Simply alert the Dharma Support team that you are going to implement surcharging, and we will coordinate your registration.
- Limit surcharging to credit cards only (debit cards and prepaid cards cannot be surcharged) and limit the amount to your merchant discount rate for the applicable credit card surcharge.
- Disclose the surcharge as a merchant fee and, for both in-store and online transactions, clearly alert consumers to the practice at the point of entry, the point of sale or transaction, and on every receipt. Merchants should also consider whether they comply with all applicable state and/or federal laws. Currently, several states have laws that prohibit or limit surcharging, including Colorado (prohibition effective through 30 June 2022), Connecticut, Maine, Massachusetts, and Oklahoma.
More information can be found at www.visa.com/merchantsurcharging.
If you’re looking for ways to offset the cost of credit card processing,
MX Advantage for Surcharging is right for you!
MX Advantage for Surcharging provides the ability to apply a payment card surcharge, also known as a checkout fee, which is an additional fee added to a customer’s bill when a credit card is used for payment. MX Advantage works for card-present and MOTO environments.
In addition, MX Advantage for Surcharging works seamlessly with the MX QuickPay, MX Payment Links, MX Invoice, and MX Quickbooks Sync. MX Advantage also seamlessly integrates with Dejavoo terminals for card-present payments with surcharging.
Best of all, MX Advantage is included with every Dharma Merchant Services Account!
Dejavoo Z11 for MX Advantage: $295
The Z11 countertop payment terminal provides an easy to use EMV payment experience for every business owner. With easy access to frequently used options in the “Favorites” Menu, and direct integration with MX Advantage for transaction surcharging, merchants love the ease of use of Dejavoo Z11. Please note, this terminal is only available for the TSYS platform. Accept every form of payment, plus implement surcharging, in the most secure way possible:
- Accept EMV (chip) sales and magnetic stripe cards
- EMV tip adjustment, so that you can take tips on your EMV sales
- Allows for Chip+PIN, for the most secure transaction possible
- Connect via IP or Dial, or utilize a wireless (WiFi) connection
- Color, touch screen for quick and easy navigation
- Take NFC payments, such as Apple Pay, Google Wallet, Visa payWave, and MasterCard PayPass
- Designed to integrate with MX Advantage to seamlessly automate transaction surcharging
Dejavoo Z11 Terminal $295
Alternatives to Surcharging
You have other tools available to you, including a convenience fee,
a service fee or cash discount solutions.
Surcharging is just one solution. You also have the ability to assess Convenience Fees and Service Fees, or offer a Cash Discount. Each of these solutions work differently according to Card Brand rules so we wanted to provide you with a little insight into each below.
- Convenience Fees can be charged only to a Transaction completed in a Card-Absent Environment. The Convenience Fee is implemented via a flat or fixed amount (not a percentage) that may be imposed on all forms of payment when a payee is using an alternative payment channel that is different from the merchant’s normal payment acceptance channel. As an example, a merchant selling movie tickets may offer the convenience of purchasing tickets online as opposed to in person at the box office. This Convenience Fee must be clearly disclosed, before the completion of the transaction, and represent payment for the convenience of paying through an alternate payment channel (such as online) that is different from the merchant’s normal payment channel.
- Service Fees can be a flat, fixed, banded, or ad valorem amount, regardless of the value of the payment due, and can be charged in both Face-to-Face Environment and a Card-Absent Environment. A service fee can be implemented by merchants in the following Merchant Categories: 8211 – Elementary & Secondary Schools, 8220 – Colleges, Universities, Professional Schools, and Junior Colleges, 9311 – Taxes, 9211 – Court Costs, 9222 – Fines, and 9399 – Misc Government Services, 8244- Business and Secretarial Schools, 8249- Vocational and Trade Schools.
- Cash Discount differs slightly from the above models and instead of being a fee based product, it offers a discount for paying in cash, however, the discount must be given as a reduction from the stated or standard price. Merchants may request or encourage a cardholder to use a means of payment other than a Credit Card, the method of doing so must be permitted under the Association rules, such as offering a discount from the merchant’s list, stated or standard price, among other possible incentives.
Get a free consultation from Dharma
Tell us how to contact you, and a little about your business, and we’ll be happy to give you a free evaluation of your fees, and let you know how you can save with Dharma