Passing on credit card fees to customers can be a big decision for your business. Some small business owners feel like they have no choice due to the high cost of credit card processing, but many retailers worry that it could drive away customers.Fortunately, there are several ways to pass on credit card fees to customers that comply with state laws and don’t require you to overhaul your entire point-of-sale system.Let’s take a look at the pros and cons of credit card surcharges, and what you need to know before charging customers a surcharge or convenience fee.

4 Ways to Pass on Credit Card Fees to Customers

When it comes to passing on credit card fees to customers, you can either do it directly or indirectly. Passing the fees on directly means that your customer covers the cost of their credit card purchases and you pay less or nothing at all.Passing them on indirectly means that you use other strategies to reduce your credit card processing fees, such as incentivizing other payment methods.

Surcharge Program

A surcharge program is the most direct way to pass on your credit card fees. In short, a surcharge program charges your customer a fee on credit card transactions in order to offset the amount that you would be charged by your payment processor.For example, with a surcharge program through Nadapayments, your customer is charged 3.5% of the purchase amount, so you take home 100% of the sale and pay $0 in transaction fees.Surcharge programs can be tricky to implement on your own, since you’ll need to abide by state and federal laws and let the credit card networks — and your customers — know about the program.That’s why it’s best to work with a merchant service provider like Nadapayments, who will take care of the paperwork for you.

Convenience Fee

Another way to pass on credit card fees is to charge a convenience fee on some, but not all, credit card purchases. If you’ve ever bought tickets to a movie or a concert online, then you’re probably familiar with these kinds of convenience fees.Unlike surcharge programs, convenience fees are legal in all 50 states, as long as you abide by the policies of the card companies (i.e., Visa and Mastercard).The important thing is that you can only charge a convenience fee for “alternative” sales channels. For example, if you have a brick-and-mortar store, you could charge a fee for over-the-phone transactions but not in-store purchases.This option won’t pass on the entire cost of credit card processing, but it will offset the cost of some payment methods.

Minimum Purchase Amount

If you don’t want to charge customers directly for using a credit card, an alternative is to set a minimum purchase amount for credit card transactions.Since some payment processors charge a flat fee plus a percentage of the transaction amount, smaller transactions result in higher costs for business owners. By setting a minimum purchase amount, you’ll be able to keep accepting credit cards but minimize fees cutting into your bottom line.

Cash Discount

Finally, another option is to offer a cash discount instead of implementing a surcharge fee. This is a good option in states where surcharge programs aren’t legal, including Connecticut, Massachusetts, and Colorado.Instead of charging more to customers who pay with a credit card, you charge less to customers who pay with cash or a debit card. This encourages customers to choose a payment method that incurs lower fees, and lets you factor the cost of doing business into your pricing model.Cash discounts are common in gas stations and convenience stores and are often applied to debit card transactions too since they have lower processing costs.

Pros and Cons of a Surcharge Program

Person paying at the cashier counter using his credit card

The most straightforward method of passing on credit card fees to customers is starting a surcharge program — but how do you know if it’s the right thing to do for your business? Let’s take a look at the pros and cons.


The first advantage is obvious: You can accept credit card payments without cutting into your profits, since the customer will bear the cost of the transaction.Depending on the size of your business, accepting credit cards can eat into your bottom line, especially if you pay merchant account fees on top of processing costs.Setting up a surcharge program simply passes those costs on to the customer, allowing you to keep your prices low for all customers. Plus, customers have the option to avoid the surcharge fee by paying with cash or a debit card instead.


The downside to starting a surcharge program is that some of your customers may be unhappy about it and may complain to your employees.If all of the other merchants in your area charge surcharge fees too, then it may not be a big deal. But if customers can go elsewhere to avoid the fee, you may be afraid you’ll lose business.You can minimize this risk by announcing the surcharge program before you launch it, and reminding customers they can opt out by paying with cash, check or a debit card.With the right messaging, your customers will understand that the program is designed to give them more payment options to choose from. Companies using Nadapayments as their surcharge solution haven’t reported any decline in sales as a result.Another con is that there are strict rules you need to follow. For example, you’ll have to register the program with each card brand and the surcharge can’t exceed 4%.When you get started with Nadapayments, we’ll take care of these details for you to make sure you don’t run into any issues.

Tips for Passing on Credit Card Fees to Customers

If you’re thinking of changing your payment policies, it’s important to do it right to avoid disruptions and reduce customer complaints. Here are a few tips to help you out.

Be Transparent

First, don’t try to hide your credit card fees behind confusing language and terminology. Post signage that explains your policy at the checkout counter, and display any credit card fees as a line item on your customer’s receipt.Not only is this a legal requirement in many states, but it will build trust between you and your customers and reduce confusion. Who knows, maybe they’ll even be in favor of the change because they want to support local businesses and help keep prices low!

Give Customers a Choice

Some customers will be fine with your surcharge program, but others may prefer to opt out and use another payment method. That’s where cash and debit cards come in.You aren’t allowed to pass on debit card fees to customers, so you’ll have to cover the cost yourself. However, processing costs for debit cards are much lower. For example, Nadapayments charges only 1% plus $0.25 cents for debit card transactions, so you’d take home $49.25 for a $50 payment.

Follow State Regulations

Finally, be sure to follow all the rules and regulations in your state. Even in states where surcharge programs are legal, such as California, customers can report you to the state’s attorney general for “unfair or deceptive” practices if you don’t disclose it.If in doubt, get help from a company like Nadapayments, who will work with you to set up a surcharge program that’s compliant with the laws of your state.

Use Nadapayments as Your All-in-One Solution

Passing on credit card fees to customers: shopper handing her credit card to the store owner

Nadapayments offers more than just a credit card surcharge program. It’s an all-in-one merchant service provider that will handle all of your credit and debit card transactions with no setup costs and no monthly account fee.You’ll pay just 1% plus $0.25 for all debit card transactions, while your customer will pay a flat 3.5% on all credit card transactions. You’ll get all of the signage you need to explain your surcharge program to customers, plus a virtual terminal for keyed-in payments. And, you can rent a credit card reader with the surcharge program built right in for just $35 per month.Sign up with Nadapayments to launch your credit card surcharge program today!