Adding a service charge for credit card payments is becoming increasingly common in states where it's legally allowed. While this practice can help offset the costs of credit card processing, it also requires careful consideration of legal, financial, and customer-relations factors.
Understanding the Legal Landscape
The ability to apply a service fee for credit card transactions varies by state. Many states permit these fees, but some have specific restrictions. For instance, states like California and Colorado regulate surcharges, so contractors need to be cautious. Credit card networks such as Visa and Mastercard also impose rules regarding surcharge disclosures, making compliance crucial.
What’s an Acceptable Amount
Service fees are typically capped at a percentage of the transaction, often between 2% and 4%, reflecting standard credit card processing fees. In some states, businesses can only charge what they pay in processing fees, no more. It's always advisable to consult legal counsel to ensure compliance. At 1 & Fund, we guide contractors toward practices that align with legal standards, but we recommend confirming specifics with your own legal counsel.
Customer Perception
For many homeowners, service fees can raise questions. Transparency is key: explaining the purpose of the fee and how it offsets processing costs may help mitigate concerns. Offering alternative payment methods like eChecks gives customers flexibility.
Our Approach
At 1 & Fund, we coach sales reps to simplify pricing by charging one price regardless of the payment method – whether finances, on a credit card, a check, or cash. This approach not only builds trust with customers but also avoids the complexities of managing different pricing structures.
However, as the trend of credit card service fees grows, businesses have choices in how to adapt. Since credit card surcharges are becoming so accepted in our culture, you might find that your customers won’t object. In that case, a surcharge might be appropriate.
As with most things, staying informed and focusing on customer experience ensures you can navigate these changes while continuing to grow your business