Surcharging and dual processing are both payment fee structures that help mitigate the costs businesses incur when processing credit card transactions. They each have their own pros and cons, both for your business and for your customers.
What is Surcharging?
Surcharging is the practice of adding an additional fee on top of the advertised price to a customer’s credit card transaction. This helps businesses cover the processing fees they are charged by credit card companies to use their services.
What is Dual Processing?
With dual pricing, businesses offer their customers two different prices depending on whether they pay with cash or with a credit card. If customers choose to pay by cash, they receive a lower total payment amount than if they pay by credit card, which charges them a small processing fee.
Evaluating Which is Right for Your Business
Benefits of Surcharging:
- Offsets fees that can impact a business’s bottom line.
- Flexibility in how much businesses charge their customers. (Federally up to 4%.)
Disadvantages of Surcharging:
- Surcharging requires businesses to follow strict regulations from both credit card companies and state law. For example, the State of Colorado caps surcharging at 2% for all card brands.
- Some states ban surcharging altogether, including Connecticut, Massachusetts, Maine, and New York.
- Surcharges cannot be applied to debit or prepaid cards.
- Many customers view surcharges negatively and may feel “nickel-and-dimed,” risking lost sales or loyalty.
- If nearby competitors don’t surcharge, customers may choose them instead.
- Visa, Mastercard, and other credit card companies monitor surcharge practices closely. Non-compliance with their regulations risks fines or termination of your MID.
- Not all POS systems, terminals, or gateways support compliant surcharging setups.
Benefits of Dual Pricing:
- Applies to all card types, including debit and prepaid cards.
- Increases savings, fee pricing can be optimized to cover more of your business’s processing expenses.
- Easier to implement with fewer regulations and compliance requirements.
- Framing it as a “cash discount” rather than a “penalty” can improve customer acceptance.
Disadvantages of Dual Pricing:
- Offering two different prices can create more administrative hassle for your business.
- Communicating the shift will require additional training for client-facing staff members.
- Posted “credit prices” may appear higher than competitors’ advertised prices if they aren’t using dual pricing.
Start Saving Money
Evolve Payment has more than twenty years of experience in the merchant processing industry. Our team of experts can help you determine which system is right for your business and help you navigate the complex setup, compliance, and employee training to start saving money on credit card transaction fees.