The Truth About Passing the Fee to Your Customers
You’ve probably seen it. More and more businesses are adding a 3% to 4% fee when you pay with a card. Whether it’s called a service fee, non-cash adjustment, or dual pricing, the message is the same:
If you want to use a card, it’s going to cost you more.
This trend is exploding. And if you talk to any processor that offers the feature, they’ll push it harder than anything else in their toolbox.
But here’s the question no one’s asking:
Why would a credit card processor encourage a business to push customers away from using cards?
Processors make money when your customers use cards. If your business starts encouraging cash payments instead, doesn’t that mean the processor loses money?
Not exactly.
Where the Money Really Goes
Let’s say your business is currently paying an effective rate of 2.25% to accept credit cards. You’re covering the fees, but it’s manageable.
Now your processor says, “Let’s help you offset those costs. Just pass a flat 3% fee to your customers.”
Sounds like a win. You’re no longer paying the processing fees. Your customers are.
But if your real cost is 2.25% and the fee being passed to your customers is 3%, 3.5%, or even 4%, where do you think the extra money goes?
Right into the processor’s pocket.
They didn’t just eliminate your fees. They gave themselves a raise and used your customers to do it.
This is why processors love pushing this model. Not because they want to help you. But because it’s one of the most profitable things they offer.
What You Should Do Instead
I’m not against passing the fee to your customers. It’s your business. You get to decide what’s right for it.
But if you do go that route, it’s worth making sure the math checks out.
Start by figuring out what your actual processing cost is.
Don’t let a processor default you into 3.99% just because “that’s the standard.”
If you’re passing along a cost, make sure it’s not been inflated before it ever gets to your customers.
This is your brand and your customer experience. Don’t let someone else quietly boost their margins while making it look like they’re saving you money.
If you’re already doing this or considering it, send over a statement. We’ll show you exactly what your costs are and whether that fee is fair. No sales pitch. No switch required.