Should Credit Card Swipe Fees Be Passed To The Customer?



If you accept credit cards at your brick-and-mortar or online business, you are probably already aware of credit card swipe fees. Whenever a customer buys a product, the business is required to pay anywhere from one to four percent of the purchase price to the credit card company. In these troubled times, when many retailers are walking a very high tight rope that can separate a small profit from bankruptcy, these merchant services fees can pose a genuine hardship.

To combat what many retailers believe to be overly burdensome charges, businesses brought a suit against the credit card industry, which was settled to the tune of $7 billion in 2012. As a result of this litigation, consumers may soon be asked to pay all or part of these swipe fees. As a merchant, you may be breathing a sigh of relief upon hearing this news. However, the situation is more complex than it first appears.

First of all, ten U.S. States prohibit businesses from passing on these fees. These include population-dense California, New York, Texas and Florida. In addition, many retailers are reluctant to institute this surcharge because they fear consumer backlash. It would indeed be counterproductive if merchants charged fees that ultimately deterred consumers from purchasing their products in the first place.

Finding Alternatives to Credit Card Swipe Fees

Retailers may find that there are more acceptable alternatives. One idea is to steer customers away from the expensive credit cards and toward cash, checks or debit cards, explaining that taking this step would save money for both buyer and seller. Surcharges can also vary depending on which type of card the customer presents. Rewards cards, for instance, cost the merchant—and the consumer by association—more than standard cards. These, in turn, have higher fees than debit cards, whose costs vary according to whether the customer merely signs or enters a PIN. Urging buyers to keep their rewards cards in their wallets in favor of debit cards could also reduce the financial strain.

The best way to ensure that you are not forced to pass prohibitive costs on to your customers is to choose a credit card processing company that is committed to keeping its fees as low as possible. There is, for instance, a wide range of processing rates that a business might be charged, so do your research on these costs before signing on the dotted line. Another money pit that you can easily fall into involves the equipment your credit card processing company provides that allows your customers to make credit card purchases. This includes wired point of sale terminals, wireless handheld terminals, mobile credit card swipers and virtual terminals for online processing. Steer clear of processing companies that charge excessive fees for this equipment. After all, there are highly respected companies that provide it for free. Having access to the full suite of processing equipment at little or no cost to you makes it much easier for your business to absorb other fees that your merchant account provider might charge. As a result, you can avoid burdening your customers with additional charges and complicated credit card tier structures.