By: Thomas Clement, MRA Vice President, Operations and General Counsel
Credit card processing is one of many valuable services offered by Michigan Retailers Association (MRA) and its affiliated entities. In September 2020, MRA added surcharging as a processing service offering. The surcharging program is designed to allow a fee that merchants can charge to cover their credit card processing costs. We have discovered that some merchants love surcharging and view it as an effective cost recoupment strategy, while others worry that it will only drive customers away. Depending on your business, either of these answers may be correct.
Regardless of whether surcharging is right for you, it is legal in most states. Michigan has no law prohibiting surcharging, but there are some requirements you should be aware of. First, you need to review the specific terms of your merchant processing contracts and the amounts that may be charged. You cannot yield a profit from surcharging and in no circumstance can you charge more than 4 percent. Surcharging is only permitted for the purpose of covering the cost associated with the transaction. Second, surcharging is only permissible for credit card charges. Debit surcharging is not permissible. Third, you must make your customers aware that you surcharge. Brick and mortar sellers must post a notice, while online sellers must have a disclosure where credit cards are first referenced on their website.
From a practical perspective, you need to consider how your customers will respond to the implementation of surcharging and what impact it will have on your business. If you are selling relatively inexpensive merchandise, the impact on the customer will likely be minimal. If you sell high dollar merchandise, perhaps your customer will seek out savings from a merchant who charges the same price but does not surcharge. You should also evaluate your willingness to accept other forms of payment, like cash and checks. Credit cards are generally more convenient than other forms of payment. With the implementation of surcharging, non-credit card transactions are likely to increase.
While surcharging is not for every business, many can realize a significant benefit.
If you would like more information or a cost savings analysis, please contact our sales department at 800-366-3699 or at sales@retailers.com.
