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Up to date, high-level business information that is relevant to our clients and contacts, helping keep up to date on the ver-changing business world of today.

Cal Wilson / March 18, 2022

What is surcharging and should your business do it?

If you accept any kind of credit card payment, you may have heard of surcharging. It’s the practice of adding an additional charge to a customer’s purchase to cover the fees a payment processor requires for processing credit cards.

While it may seem like a win for you, the merchant, it’s not a completely problem-free practice.

In this article, we take a look at this practice. Should your business consider it? What are the pros and cons?

Why do some merchants surcharge?

Every time a customer swipes their Visa, Mastercard, American Express, or other kind of credit card, you incur a processing fee. These are called interchange fees. According to Quickbooks, the following variables impact a merchant’s interchange fees:

  • The credit card company
  • The type of card being used – i.e., whether it’s a rewards card, a business card, etc.
  • How the transaction is processed – POS, over the phone, or online.
  • The price of the product or service.
  • The type of business of the merchant.
  • Whether the transaction is domestic or international.

Likewise, rates change twice a year, in April and October.

Interchange fees are just one of the many fees merchants are charged to be able to accept credit card payments.

How does surcharging work?

Without surcharging, that fee lies squarely on the merchant.

If you’re looking to pass that expense onto the customer, you have two kinds of surcharging options; brand or product surcharging. Brand surcharging adds a charge every time a customer uses a card from a specific credit card provider; some merchants may add a surcharge, for example, on Visa purchases, but not Discover purchases. Surcharging on the product level, however, only adds surcharges on certain types of cards under a specific brand. Merchants may choose one option, but not both.

Surcharging is subject to different laws in different regions.

As you can imagine, in order to protect the consumer, surcharging is heavily regulated. In some places, it is not legal at all.

In fact, in the United States, surcharging is illegal in Connecticut, Maine, and Massachusetts. In Canada, service fees can only be added on certain kinds of transactions.

For the regions where surcharging is a legal practice, merchant are beholden to a surcharging cap. These vary by area, but often fall around 4%. The caps are put in place to prevent merchants from making profit from surcharges.

No matter where you are, if you surcharge, your business is subject to rules of disclosure. Merchants must disclose their intention to surcharge ahead of a transaction, and at multiple touchpoints while a customer is in the store. This includes such notices as a sign notifying the business’ surcharging practice at the store entrance, as well as at the point-of-sale. The surcharge dollar amount should also be clearly visible on the customer’s receipt.

While these practices keep surcharging ethical, they can also be off-putting to some customers, who only see the addition of a fee they might not completely understand.

Does surcharging save your business money?

There is no simple answer to this question. It can, but it depends on your business and your customers.

According to Evolve Payment, “[i]f your industry is a ‘race to the bottom’ where the lowest price wins, then surcharging is likely to hurt more than it helps. This is especially true in B2B industries with corporate contracts.”

For some businesses, adding fees like surcharges is going to be more common practice and expected by the customer. In other industries, it might hurt your chance of making a sale.

Fortunately, there are other strategies.

So your credit card processing fees are eating into your revenue, but you don’t think surcharging is the right move for your business. Not to worry – there are other things you can do to ease the expenses.

For example, instead of surcharging, many businesses offer cash discounting.  In this practice, merchants discount the price of purchase if the customer pays with anything other than a credit card. And, while surcharging isn’t legal continent-wide, cash discounting is.

Cash discounting is only possible if you have a certain amount of wiggle room on your markup pricing. However, when it is an option, it certainly is a bonus for customer experience.

Another tactic is setting a minimum for credit card payments. Depending on your rates, it may not be profitable to offer credit card payments under a certain dollar amount.

Another strategy is working to reduce your overall merchant services spend. Part of this is exploring what options are available to you among multiple vendors, knowing rates are fair, and how to negotiate for the best price. A cost reduction professional who specializes in merchant services might be your best asset if you take this route.

In conclusion


As Evolve Payment says, “surcharging is, at the end of the day, passing business expenses onto your customers.”

While it has the potential of saving you money on your variable expenses, it’s not always a great strategy optically. Offering cash payment incentives, working to reduce your overall merchant services fees, and ensuring you’re paying the correct rates, are alternative strategies to reduce your spend while keeping customers happy

Cal Wilson / March 18, 2022

What are variable expenses and how can they impact your business’ bottom line?

When creating a budget for your business, it is helpful to separate and account for fixed versus variable expenses. Mistaking the latter for the former can cost you, and the better you understand all your expenses, the better chance you have of optimizing them.

If you’re unfamiliar with the concept, the best way to describe the difference is that fixed expenses are costs that stay the same from month to month, whereas variable expenses are ever-changing and harder to predict.

Fixed expenses.

Fixed expenses often represent the largest part of your budget. For a business, your fixed expenses are going be costs such as rent payments, insurance premiums, property taxes, and so on. While these are not easy to optimize, they are easy to work into your budget, as they are unchanging and paid at a consistent frequency.

If you can lower these expenses – say, by finding a different insurance plan that works for your needs – you automatically save more money each month or pay period.

In business budgeting, it is important to remember that all your fixed costs must be paid, regardless of your sales that pay cycle. If you’re starting a business, making sure you can cover these expenses for a period before you start bringing in revenue is crucial to staying afloat.

Variable expenses.

Your variable expenses are going to represent the costs incurred by how a given month or pay period goes for your business. How many credit cards you swipe, how much electricity you use, or how much waste you generate; all of these are going to incur a bill that varies every cycle.

Some of these expenses can be harder to reduce than others. How much heating you use to keep your office warm, for example, may be more difficult to lower than the amount of waste your organization is generating. However, in many cases, these expenses are in areas that you can strategize or work with professionals to identify savings, creating a more predictable monthly bill.

Employees can represent either kind of expense.

Depending on how you staff your business, your employees can be either a fixed or variable expense. Anyone hired on full time, who is guaranteed a forty-hour work week, will be a fixed expense, whereas a seasonal or part-time employee will likely be a variable expense, as their hours are subject to change month to month.

Budget with these expenses in mind.

When you’re budgeting, it’s important to separate your fixed costs and your variable costs. If you’re able to determine what you absolutely will be spending in your fixed costs, then it is easier to identify and strategize areas to save with your variable costs.

Month to month, keep track of your variable expenses. Maybe one month you allotted too little to certain expenditures and went over budget. If you keep a closer eye on each cost category, you can do a better job budgeting and planning for the future going forward.

Don’t settle on expenses.

The lower you can keep your costs, fixed or variable, the better the results for your bottom line. If you don’t have experience negotiating rates or deciding what expenses are fair in comparison with the rest of the market, don’t settle. Explore your options, bring in consultants, and work with professionals who can guide you in the right direction.

Especially for the fixed expenses you will be locked into for some time, this could be a make-or-break decision for your business. Why pay more than you have to?

Cal Wilson / March 18, 2022

Five tips to minimize card processing expenses

As businesses are racking up debt and supply chain issues are increasing material expenses, cutting costs is more important than ever. With many businesses offering online shopping as an alternative to in-store, you might find your payment processing environment has changed or become more expensive.  

If this sounds like your business, here are five tips for reducing your credit card processing fees, and making the most of your revenue.  

1. Keep an eye on your rates.

Complete monthly audits of your merchant services statements to check for billing errors and avoid rate creep. Processors usually offer seemingly standard contracts, but many contain provisions that allow them to increase your rates. This often comes with the caveat they must notify you first — but those notifications could appear in small print on one of your statements. Be sure to read your statements for notification of rate increases and periodically check your rate to see if it has mysteriously increased. Often, all it takes for them to waive the rate increase is a phone call to object. 

2. Swipe cards and answer questions.

Credit card fees are primarily based on risk. This means you’re better off swiping or inserting a card than entering the number manually. Whenever a number is entered by hand, your processor considers it a higher risk transaction and may charge a higher fee. However, not all organizations have the resources to physically swipe or insert a card. If you’re inputting the card number manually, answer as many of the processor’s questions as possible. Providing information such as the customer’s zip code, debit vs. credit, and the three-digit or four-digit code on the back of the card are all designed to lower the risk of fraud. By entering as much information as possible and lowering the risk, you’ll see reduced transaction fees! 

3. Use an address verification service.

An address verification service (AVS), is a solution that verifies the cardholder’s billing address with the card issuer. It takes your payment services a step further in preventing fraud and has been a big benefit in the world of e-commerce, including limiting chargebacks. 

It works when during the checkout process, the customer enters their address, which is compared to the address on file with the issuing bank. Once the comparison is made, the issuing bank sends an AVS code to the merchant, who can then use the code to authorize or reject the transaction. 

Many major card issuers, including VISA and MasterCard, support AVS. 

4. Make sure PCI Compliance is up-to-date. 

A vendor will incur monthly fees from the Payment Card Industry (PCI) if its compliance questionnaire is not completed annually. These fees will continue to build up indefinitely until compliance forms are completed. The online questionnaire usually takes less than 30 minutes and saves hundreds of dollars every year. By completing the questionnaire, you assure your credit card processor that you are taking the proper steps to keep customer information safe and minimize the risk of fraud. 

5. Hire a professional.

An independent merchant services consultant will find you the lowest rates possible in your area, and can also track your rates going forward to make sure you’re never paying more than you should. For example, Schooley Mitchell looks out for your best interests by providing objective advice to reduce your electronic payment processing spend and improve service. 

Systematic analysis and auditing will: 

  • Uncover and eliminate hidden fees 
  • Identify and recover overcharges and billing errors 
  • Select and apply appropriate rate categories 
  • Ensure government legislation is properly applied 

In conclusion
 

Now is not the time for your business to be spending more than it needs to on credit card processing fees. In reducing costs and growing your bottom line, we hope these tips will be of aid to you.  

Terri Braun / March 18, 2022

Featured Client Our Lady of Grace

Our Lady of Grace is a Catholic Parish located in Noblesville, Indiana. It endeavors to offer hospitality to all parishioners and visitors, to be authentic and joyful, and to help believers nurture their faith through worship, sacraments, and daily mass.

Terri Braun / March 18, 2022

Featured Client Scooch

The Scooch case is a mobile phone case with a streamlined design. It brings function and style together, allowing users to mount it, grip it, and clip it, all while protecting devices from falls, bumps, and accidents.

Terri Braun / March 17, 2022

Recommendation for Coconis Furniture & Mattress 1st

To whom it may concern:

It is with great pleasure that I write this letter of recommendation on behalf of a great business, Coconis Furniture & Mattress 1st. With roots dating back to 1927, Coconis Furniture & Mattress 1st is a fourth generation, family-owned furniture company that provides great selection at low prices.

Coconis Furniture & Mattress 1st offers a myriad of quality products including sofas, sectionals, chairs, dressers, mirrors, mattresses and much more. It has in-store and online design services as well as flexible financing options from four locations across Zanesville, Heath, and Lancaster.

At Coconis Furniture & Mattress 1st, it is truly the team that makes all the difference. Each member is friendly and knowledgeable of the products they sell. They are happy to answer any questions you may have and take the time to walk you through the entire process to find exactly what you are looking for.

Coconis Furniture & Mattress 1st doesn’t just provide great products and services – it is also a proud supporter of the local community. It is involved with many organizations such as Goodwill, The Muskingum Valley Red Cross, Sertoma and Autism charities including the local annual “Tee It Up Fore Autism” golf outing held each June.

I recommend Coconis Furniture & Mattress 1st without hesitation to anyone looking for the perfect furniture pieces for their unique space. With Coconis Furniture & Mattress 1st and its great team, you can rest assured knowing you will receive quality furniture and great customer service every time.

Sincerely,

Jim Lichtenberg
Strategic-Partner
Schooley Mitchell

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Terri Braun / March 17, 2022

Recommendation for New Motors

To whom it may concern:

I am more than happy to write this letter of recommendation of behalf of a great business, New Motors. Locally owned and operated, New Motors offers a host of quality new and used BMW, Volkswagen, and Subaru vehicles available for purchase or lease.

New Motors was originally opened in 1927 by Vincent New in Hartstown Pennsylvania as a gas and service station. Today, it is the top parts wholesaler in Pennsylvania, Ohio, New York, Virginia, and West Virginia and boasts 42,500 square feet of workspace, with two showrooms.

At New Motors, it’s not just the selection that is impressive, the customers service is as well. It is backed by a team of 95 highly skilled, talented, and experienced individuals who are all 100 percent committed to providing nothing less than superior service. They go above and beyond for their clients in order to help them find the vehicle that best suits their needs.

The team at New Motors are also strong supporters in the community. Larry New is a member of the Board of Trustees for the PAAF (Pennsylvania Automotive Association Foundation), and they are proud members of the Sierra Club. They regularly donate to many organizations such as the Mercy Center for Women, Saint Mary’s Home of Erie, Gannondale, and the Sarah A. Reed Retirement Center.

I highly recommend New Motors to anyone who is in the market for a new or used vehicle. With its wide selection of BMW, Volkswagen and Subaru’s and amazing customer service, you’ll be sure to find the vehicle you’ve been dreaming of, at a price that’s reasonable.

Sincerely,

Adam Baker
Strategic-Partner
Schooley Mitchell

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