Picture this scenario: Every Friday, you go to your favorite pizza shop and spend exactly $20.00 for your favorite pizza. One week you arrive and the pizza now costs $20.70.

The owner explains that the cost of doing business has increased over the years and adjusted his prices accordingly. Would you protest?

Now a different scenario: You arrive to pick up your pie and there’s a sign on the counter that says all orders are subject to a 3.50% fee and the fee will be waived if you pay cash.

You always pay with your plastic so the cost of your pizza just went to $20.70. You’re being charged for using your credit card. Would you protest?

In each scenario, the cost went up. Most people would understand the first example, costs go up so the prices do as well. But what about the second one? Will people object to paying a fee or surcharge to use their plastic?

In case you haven’t heard by now, surcharging and cash discount programs are in full swing at businesses all over the United States. The use of credit & debit cards has been on the rise and some small business owners are tired of paying the fees that come with it.

Adding a small fee to each transaction, that’s paid by the customer, eliminates the cost to the business owner and passes it directly to the consumer. But is this a good practice? Will it aggravate your customers?

A recent article by James Shepard suggests that surcharging has cleared three major hurdles and has not faced major objections, as some had anticipated.

Three things to consider:

  • Consumer reactions
  • Card brand and media reactions
  • Consumer advocacy reactions

Consumer Reactions

Prior to 2013, credit card surcharging was restricted in all 50 states. The big players (Visa, MC AMEX Discover) feared that it would discourage consumers from using their cards. Gas stations were given an exemption, but it was not an option for most.

In 2013, a group of merchants challenged the legality of the ban and in 2015 the tide started to turn in favor of the businesses. One of the final battles was in NY and it was settled in January of 2019, clearing the way for businesses here as well.

Surprisingly, most consumers have not had strong objections and understand the basic costs involved for the business owner. The biggest complaint has been from people who are not told ahead of time and were hit with a surprise on their bill.

A recent article in the NY Post described customers as ‘furious over sneaky charges’ on their bill.

However, the article only mentioned three consumers and was not widely circulated.

In NY, merchants are required to clearly mark their prices cash/credit so that consumers don’t have to guess or do any math to calculate a surcharge.

Inevitably, there will be some people who don’t like it, but overall, we haven’t heard of businesses facing severe backlash for surcharging.

Card Brand and Media Reactions

The media has been mostly silent on this issue and the card brand associations have received few complaints. It would seem that the initial worries about people not using their cards have not come to pass. Consumers love their cards and will continue to use them

Consumer Advocates

Consumer advocacy groups have not been opposed to surcharging with, which is surprising to some. Since surcharging does not prevent people from accessing goods or services they haven’t had much to say. In fact, I searched online for possible reactions from consumer advocate groups and I could only find articles from 2013.

Should Your Business Charge a Fee?

This is the BIG question for most small business owners – will surcharging alienate my customer base? Only you as the business owner can make this decision. For each business, it’s going to be different.

If you’re a smaller retail shop competing against the big box stores and eCommerce, I would say don’t do it. If you’re the best auto repair shop in town, you might have a better position. I’m hearing that auto repair is one of the fastest-growing categories for surcharging and cash discount programs.

So what’s your opinion? Would you object to paying a fee? If you’re a merchant would you charge a fee? Please leave a comment below.