For the last several years, it has been illegal to pass on the credit card processing fee to your customer. (This is also called a “checkout fee”. It’s when charge your customer for the 1.5-3% of credit card processing.) Earlier this year, as the result of a lawsuit between retailers and the payments industry, this law was reversed in 40 states. NOTE: there are still 10 states where this is not allowed.
You CANNOT charge the credit card fee (aka “checkout fee” or “swipe fee”) to your clients in these 10 states:
- New York
Note: it’s also against Paypal’s policy to add a fee to cover their processing. If found out, your account can risk being shut down.
Charging Checkout Fees
If you do live in a state where this OK and you want to charge this, you are required to inform your clients in one of the following ways:
- at the store entrance
- at the point of sale online (at the first website page where you ask for payment information), AND
- on the customer’s receipt (as a line item that says ”surcharge”)
But – keep in mind – even if you are ‘allowed’ to do this now, is this something you want to be doing to your clients? Nickle-n-diming them? Or is it better to raise your pricing overall to absorb such costs of doing business? On the flip side, the U.S. suffers from credit card abuse. Does this incentivize people to spend money they have? (Here’s a really great article from Wall Street Journal about how a business owner sees this as a way to encourage cash use. It’s an interesting point of view.)
“Steering” Clients towards Cash/Check Payments
If you do business in one of the states where you cannot pass along the checkout fee, you can ‘steer’ clients towards using cash by offering a discount if paying with a check or cash. This would also be applicable with Paypal (and other online merchant processors).
What are your thoughts? Will/Do you pass along the checkout fee to your client?