Use Surcharging to Offset Payment Processing Costs

For many businesses, accepting credit cards offers customers a simple way to pay, but it comes with costs that impact your margins. Merchants can offset these fees and protect their revenue margin without sacrificing the overall customer experience with compliant surcharging.

Learn about compliant surcharging and how it can offset your costs for processing payments:

What Is Surcharging?
Why Businesses Are Embracing Surcharging
Who Does Surcharging Affect/Impact in Your Organization?
Global Surcharging Considerations
How Does Surcharging Impact the Customer Experience?
BlueSnap’s Built-In Compliant Surcharging

What Is Surcharging?

Surcharging lets merchants pass on transaction fees during the checkout process to customers who choose to pay with a credit card. Rather than absorbing the full cost of the transaction, merchants can add a surcharge fee at checkout or on an invoice with a disclosure notice breaking down the additional fee. Merchants who choose to surcharge must follow consumer disclosures and other requirements, which include card brand rules, and country and state laws.

Complying with the applicable laws, rules and regulations for surcharges is critical. Some states and countries prohibit surcharging, and state laws in the U.S. vary, and are subject to change. Prohibitions, restrictions or limitations may be added at any time, and merchants should monitor and manage the requirements they are subject to.

Why Businesses Are Embracing Surcharging

Previously, allocating a percentage of your sales to processing customers’ credit cards was a part of doing business. Businesses understood the tradeoff for offering this convenience. But now businesses have the option to keep their profits and redirect that cost back to the customers who choose to pay with their credit cards.

With surcharging, you can efficiently offset transactions fees for customers paying with credit cards. Surcharging helps businesses:

• Expand revenue while protecting profitability
• Fund digital payment modernization
• Provide transparent fee communication to maintain customer trust
• Provide a fair pricing strategy to alleviate cost increases for buyers

Enabling compliant surcharging for your business can help you recover up to the 3% of processing costs, significantly increasing your bottom-line. Without these cost recovery strategies, expansion and reinvestment can become constrained.

Who Does Surcharging Affect/Impact in Your Organization?

Surcharging is especially powerful and can impact departments across an organization:

• B2B Merchants: B2B businesses processing high-volume or high-ticket transactions can save more by enabling compliant surcharging to preserve more of their bottom line.
• Finance Teams: Responsible for fee modeling and revenue tracking, finance teams that enable surcharging gain the flexibility to determine strategic pricing for products and services to help stay competitive in the market.
• Support & Sales: Being on the front line, support and sales teams need to be able to handle merchant inquiries and help them understand why a surcharge fee is implemented. In most scenarios, B2B buyers expect to pay some sort of fee in exchange for the convenience of paying by credit card.

Offering strategic advantages for many internal departments, surcharging helps your business run efficiently, creates a better payment experience, and preserves margin.

Global Surcharging Considerations

A merchant’s ability to surcharge shoppers depends on where the merchant is located. Different countries and jurisdictions within them have different requirements.

For example, here is information on where surcharging is permitted within the U.S., Canada and Australia when using BlueSnap’s Surcharge API:

U.S.:

• Businesses located in New York, Puerto Rico, Maine, Connecticut and Massachusetts cannot surcharge shoppers
• Surcharges can only be applied on credit cards
• Surcharges cannot be applied to debit or prepaid cards

Canada:

• Businesses located in the province of Quebec cannot surcharge shoppers
• Surcharges can only be applied on credit cards
• Surcharges cannot be applied to debit or prepaid cards

Australia:

• No surcharge restrictions apply based on merchant location. Surcharges can be applied on all cards (credit, debit, and prepaid cards)

How Does Surcharging Impact the Customer Experience?

Some merchants are concerned surcharging will discourage shoppers from completing a purchase. But the reality is that surcharging is now common across varying industries.

When communicated clearly and paired with no-fee alternatives, most customers accept surcharging as a standard cost of using credit cards. In fact, many appreciate having control over how they pay rather than being forced into one method.

Surcharging isn’t about penalizing customers; it’s about preserving your margin. For many businesses, absorbing up to 3% in fees on every sale simply isn’t sustainable, especially for high-ticket goods. Passing the cost to those who choose the more expensive payment option lets businesses keep prices stable for everyone.

BlueSnap’s Built-In Compliant Surcharging

BlueSnap offers fully integrated surcharging capabilities within its Global Payments, Embedded Payments and Accounts Receivable (AR) Automation solutions. If your business has a legal entity in a permitted region within the U.S., Canada or Australia, our Compliant Surcharging lets you:

• Automatically apply surcharges to credit card transactions in the U.S. and Canada, and to credit, debit and prepaid cards in Australia based on card brand rules
• Keep clean reporting and reconciliation with fee amounts itemized separately

Businesses can choose whether they’d like to use this surcharging function; it is not required. If a business chooses to add surcharging functionality, all they need to do is contact BlueSnap Support to enable. Our technology is designed to help you manage your compliance.

When offered transparently and fairly, surcharging is a practical tool that helps merchants stay profitable without limiting payment choice for their customers. BlueSnap makes it compliant, automated and user-friendly.

To learn more about BlueSnap Compliant Surcharging, talk to a Payments Expert today.

Frequently Asked Questions

What is a surcharge?

A surcharge is a fee that a business charges to a customer that pays by credit card to cover the cost of processing the transaction.

What is the difference between a surcharge fee and a convenience fee?

While a surcharge and a convenience fee are both ways for businesses to recoup the costs of accepting payments and they are both regulated by the card brands and the government, they are not the same thing.

A surcharge is a regulated fee that a business can assess to credit card purchases.

Convenience fees can only be added when customers make a purchase using a payment method considered nonstandard for the purchase.

How does a merchant enable surcharging with BlueSnap?

Surcharging must be enabled at the merchant level via BlueSnap. You must notify BlueSnap and card brands (e.g., Visa, Mastercard, American Express, Discover) in writing at least 30 days prior to applying surcharges. Our Implementation Team can assist.

Can I impose a surcharge on all payment methods through BlueSnap?

It depends on your merchant official location; certain countries may allow for surcharging on debit, credit and prepaid cards. BlueSnap allows for surcharging only on debit, credit and prepaid bank cards in Australia, with surcharges only on credit cards in the United States and Canada.

For those countries where BlueSnap supports surcharging, what are the country-specific maximum allowable surcharge rates?

• Australia: must be capped at processing cost of the card (no fixed cap)
• Canada: 2.4% maximum
• United States (and its territories, other than Oklahoma): 3% maximum
• Oklahoma: 2% cap

What happens when a surcharged transaction is refunded or returned via BlueSnap?

If you have applied a surcharge on a transaction that a customer fully or partially refunds, the corresponding portion of the surcharge must be refunded. Receipts need to include appropriate refund/return policy links.

BlueSnap calculates the proportional amount of surcharge for both full and partial refunds.

Which payment methods can I surcharge with BlueSnap?

• In the United States: surcharging is allowed on credit cards only (not debit/prepaid).
• In Canada: surcharging is allowed on credit cards only (not debit/prepaid).
• In Australia: surcharging may be applied to credit cards, debit cards or prepaid cards.

Does BlueSnap restrict surcharging based on the shopper’s location?

No. As required by card brand rules, BlueSnap implements surcharging based on the merchant’s location, not shoppers. Merchant’s located in the U.S., Canada and Australia can implement a surcharge fee following local and regional laws and requirements.

Merchants located in surcharging prohibited/restricted states — such as Massachusetts, Connecticut, Maine, New York — cannot apply surcharges to any US shoppers.

Canadian merchants based in Quebec cannot apply surcharges to Canadian shoppers, but they can surcharge U.S. and Australian shoppers.

Does surcharging affect my authorization or settlement process with BlueSnap?

No. The authorization and settlement process remains unchanged. The surcharge is simply added as a separate line item, and the total amount (transaction + surcharge) is processed normally through BlueSnap’s payment gateway.

How does surcharging appear on the customer’s card statement?

The surcharge will not appear as a separate descriptor on the card statement. Instead, the total amount charged — including the surcharge — appears as a single transaction. However, the receipt you provide must clearly break out the surcharge as its own line item.

Is surcharging mandatory with BlueSnap?

No, it’s entirely optional. If you are a merchant using BlueSnap, you may choose whether or not to impose a surcharge on your customers in accordance with card brand rules and geographic regulations.