Charging Customers a Credit Card Acceptance Fee:
What Independent Shoe Retailers Need to Know
By Alan Miklofsky
As a small business retailer selling shoes, you might be considering the implementation of a credit card acceptance fee to offset transaction costs. While this is a feasible option, there are several important factors and regulations to consider before proceeding.
State Laws
Different states have varying regulations regarding credit card surcharges. Some states, such as California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas, have restrictions or outright bans on credit card surcharges. Make sure to check the specific laws in your state to ensure compliance.
Credit Card Network Rules
Credit card networks like Visa, MasterCard, American Express, and Discover have their own rules about surcharges. Generally, these rules include:
· The surcharge cannot exceed the cost of accepting the card, usually capped at around 4%.
· Customers must be clearly notified about the surcharge before completing the transaction.
· The surcharge must be itemized on the receipt.
· You must inform the card network and your payment processor of your intention to start charging a surcharge, usually at least 30 days in advance.
· Transparency and Disclosure
· Transparency is crucial when adding a surcharge:
· Display clear signage at the entrance and point of sale indicating that a surcharge will be applied for credit card transactions.
· Include the surcharge amount on the receipt as a separate line item.
· Ensure the surcharge is disclosed before the transaction is completed, not after the sale is finalized.
Customer Experience
Consider the potential impact on customer satisfaction. Some customers might be deterred by additional fees, which could affect your sales and customer loyalty.
I believe that taking this step will likely result in the loss of more customers, thereby negatively impacting sales and gross profits more than the fee collected can possibly generate. This negative reaction could outweigh any financial benefit from the surcharge, making it a counterproductive strategy for your business.
Compliance
Ensure that your practice complies with all relevant regulations to avoid fines and legal issues. It might be beneficial to consult with a legal advisor or compliance expert to ensure that your surcharge practices are compliant with all applicable laws and network rules.
Summary
While it's possible for your small business to charge a credit card acceptance fee, you must carefully adhere to state laws, credit card network rules, and best practices for transparency. Always prioritize clear communication with your customers to maintain trust and satisfaction. Weigh the potential financial benefits against the possible negative impact on customer loyalty and overall sales before making your decision.