Why am I being charged a convenience fee to use my credit card?

Being a credit cardholder, we think we know the basics of having a card. You may know your interest rate and when your bill is due but what goes on behind the scenes?  You may have noticed recently that some retailers are now charging a fee to use your credit card. In the past you may have only noticed this when paying your utility bill or property taxes. However more recently other business types have gotten in on this practice.

Why are more businesses choosing to pass a convenience fee along?

The answer is simple. It comes down to cost and saving money as a business. You may not realize but every time you swipe your card the business you swipe it at is being charged processing fees to accept your card. What’s even stranger is that the rewards cards we love so much as cardholders actually charges the business more to process those cards than a normal credit card.  So, for our convenience of tallying up our rewards points the business is being penalized monetarily. It becomes harder and harder to absorb these fees so many businesses are now passing that fee along to the cardholder. They are instituting a cash discount program. This is remarkably similar to gas stations who list a cash price and a credit card price for fuel. They incent customers to pay with cash because this is the cheapest method of payment for a business.

Can a business charge a fee to use a credit card?

The answer is yes, they can. There are several ways a business can transition the fee along to the cardholder. The card brands have a surcharge program in states that it is legal. This allows the business to disclose the fee and pass it along at time of purchase. There is also a Cash Discount Program that is legal in most states that promotes cash usage. They institute a service fee or list cash price and credit card price for services and products.

Other Methods of passing the cost along

Ever since the implementation of credit card processing fees, businesses have been finding ways to offset the cost that they have to pay their processor.

  • Very commonly, businesses have been raising their prices by the same percentage that they are billed to cover the cost.
  • Ilegally passing the fee by not disclosing it by adding it to the total bill.
  • Refuse to accept credit cards.

All these ways are in practice today to assist business owners in covering the cost of accepting credit cards. As a cardholder I prefer to have the fee disclosed upfront so that I can decide if I want to use cash or a credit card. This is the compliant way to pass a fee along and rightfully so. If you own a business or visit a business that is passing the fee along in a non-compliant manner let them know there are programs out there that will assist in implementing their cash discount program.

How to lower credit card processing fees in 2021 ?

All business owners or managers look for ways to reduce the cost of processing credit cards. In today’s climate every penny counts to the bottom line. More than ever small businesses are cutting back on expenses. Lets take a look at what pricing programs are available and the pros and cons of each. We are going to give you two steps to finding the best pricing program and reduce your cost of processing fees in 2021

The first step in reducing your cost as a business owner is to find a reliable processor and an agent you can communicate with. The representation of a processor is crucial in ensuring you have a voice at your processor. 

The second step is to 

know what pricing options are available you. There are many ways to setup a merchant accounts pricing structure. Here are the 3 most preferred ways.

Traditional Pricing


Pass through interchange plus is the most cost effective if you the merchant and absorbing the processing fees. In this pricing scenario you, the business pays the interchange cost plus a markup. This is normally displayed transparently on the monthly statement. This is great for merchants with high monthly sales.  The benefit to getting interchange cost is that you get the benefit of the low-cost interchange rates such as signature debit and EMV chip transactions. 


The only con to this pricing program is estimating your monthly costs and reading the merchant statement. These statements show the interchange qualifications and the mark up. Some business owners find reconciling to be a challenge.

Flat Rate


This pricing program became popular with companies like square. They give you a flat rate for swiping a card and a flat rate for keying cards in. This program is easy to navigate your costs. 

Cons- Although knowing you have two rates helps estimate the cost of your monthly processing it does cost you the business more. Your lowest rate charged is the swiped rate generally at 2.75% or more. That means the least you will be billed is this. On interchange plus program you get the benefit of cards like signature debit cards that qualify at .05% which can be a huge savings. 

Cash Discount- This is the most cost effective for the business. This is where the business passes the processing fees to their customers the cardholder. They price all goods and services at a discounted cash price. They post notifications within their establishment and by the cash register that states that all goods and services are priced at a cash price. If they chose to use a credit card than a service fee is applied. Generally the only fee the business pays on this program is a monthly fee.  This can bring savings of over 95% to the business.  It is a huge savings.


This program saves most businesses at least 95% of processing fees. The only fee normally paid is a monthly fee which covers any technology and statement fees.  Most consumers are accustomed to paying a fee when they pay their utilities, taxes, booking concert tickets and now retailers. This program is most successful when the business posts a notification 30 days prior to implementing it. This gives customers notice to bring cash if they do not want to pay the fee.


The only con is how customers receive the program. Most businesses worry about upsetting their customers by passing this fee along.  The truth is most customers are open to helping small businesses stay in business. The program is successful when a 30-day notice is given to the customers and signage is present in the establishment. We found that only 3% of businesses who try this program switch back to the traditional program. 97% of businesses find this to be a game changer. They use the money saved from processing for employees, new equipment, and more products. 

All businesses have their own set of needs for technology and pricing be sure to find a processor you can work with transparently. Having great representation in your sales agent is key to fostering a good relationship with your processor. What ever program mentioned above works for your business make sure your processor has these options and is willing to give you the program you want. 

Credit Card Surcharges : Charging Fees For Using Credit Card Explained

Surcharging your customers to use a credit card

You may notice when you go to pay your utility bill or tax bill that there is a surcharge to use your credit card for payment. For years we have seen these fees applied by government entities. Today its more mainstream and retailers and service providers are now utilizing a surcharge program to pass the fee along to the cardholder. 

With a surcharge program there are rules that must be adhered to in order to do this compliantly with the card brands. Your credit card processor must register you with each card brand as passing a surcharge along to the cardholder. You the business must give customers a 30 days notice to implementing a surcharge program. In addition, the surcharge fee must be posted within the establishment, on the website and near the cash register. The surcharge fee must be displayed and separated on the cardholder’s receipt. This program is not offered in the following states California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. 

What if surcharging is not allowed in my State?

If you are in a state that does not allow surcharging than a cash discount program will work best for you. A cash discount program allows you the business to offer a discount for cash purchases and to pass a fee along on credit card purchases. You may have seen this in practice at gas stations today where they list a cash price for gas and a credit card price for gas. The key is to find a processor who can offer you technology to do this compliantly. 

What to look for in a cash discount program

When looking for a processor for cash discounting it is important to have a compliant program. See some tips below on how to spot a compliant program.

  • Customer Signage- Signs within your establishment notifying customers of this policy. We recommend posting 3 signs one at the door, one within the establishment and one by the cash register. If you have a website it is also recommended to post this policy. 
  • 30 day notice to customers- 30 days prior to implementing the cash discount program in your business be sure to post signs in your establishment and notify customers that on a given date this new program will go into place. This allows customers to make arrangements to use cash if they do not want to pay the fee.
  • The technology such as credit card terminal, mobile app or Point of Sale System much break out the fee as a separate line item on the receipt. If you are adding the fee yourself and it is not displayed on the customers receipt this is not considered compliant.  Make sure your processor has this broken out on the bottom of the customer’s receipt. This is very transparent to the cardholder and in turn reduces any misunderstandings or chargebacks. 
  • The fee passed along to the cardholder cannot exceed 4% of the sale.

Which is best a Surcharge Program or a Cash Discount Program?

Depending on what state your business is in may be the best way to evaluate this. If you are in one of the states that prohibits surcharging than you will want to institute a cash discount program. The payment industry has been putting time and resources into the cash discount program for the last several years. You may find that the technology available to you may be better in a cash discount program. I would suggest using technology and your needs as a business to help you make this decision.

Processors are building iOS and android apps incorporating the cash discount program. They are developing terminals and point of sale software’s to accommodate the influx of customers demanding this program. There isn’t a lot of development going on regarding surcharging. Where surcharging was designed to initially allow government entities and municipalities to pass this fee along the technology development was left to these entities. Let your business needs decide what program works best for you. The truth is transitioning your credit card processing fees is a huge savings to businesses. 

What do I charge my customer to use a credit card?

Turing an expense in your business into a profit can be a game changer. Cash discount programs allows you the business to pay zero percent processing fees. Depending on your processors program can reduce your fees from 95-100%. Most processors should only charge a monthly fee this should cover PCI fees, statement fee and equipment fee. The fee you pass along to your customer is covering all the processing fees. The fee passed along is anywhere up to 4%. For merchants who have a small average ticket you may decide to pass along a set fee of $.049. For businesses with average tickets over $20.00 it is recommended to charge 3.95%. This rate is generally determined by your credit card processor.  Be sure to ask how their program works and what options are available. You be the final decision maker of what fee will work best for your customers.