For years, card issuers have been making loads of money off of interchange fees. This fee, typically between 2% and 3% of the total transaction, is the price that a store pays the bank when you use a credit card to make a purchase. For start-ups, small businesses, and other high-risk merchants that don’t have the capacity to negotiate lower rates, these credit card surcharges can cut into profits in a big way.
The good news is that, now, businesses that have been paying two or three percent per credit card transaction to a bank or merchant account provider can technically offload those fees onto consumers. If a small business was struggling to turn a profit, this new ruling could mean the difference between survival and going under.
The bad news is that consumers won’t be happy. And there’s nothing worse than a dissatisfied customer.
So, while yes, passing along the credit card surcharge to the client can offload some of the financial burdens for a small business, it can also drive customers away and send them looking elsewhere for goods and services.
Another possible scenario? Customers might cut back on paying with credit altogether and start using cash with more frequency. Research shows that consumers spend more money when they pay with a credit card compared to cash (up to twice as much, by some estimates), so stores certainly want to encourage card use as much as possible. If the surcharge curbs the spending, that could spell disaster for a small business.
Ultimately, it’s unclear the effect this will have on customers, so businesses will have to tread lightly.
It’s likely that account providers like HighRiskPay.com will stay neutral during this time and let merchants handle it on an individual basis. While small business owners and vendors in most states are now legally allowed to charge consumers the extra amount that credit card companies charge them, this could have the negative effect of limiting spending, and that’s the last thing a small business wants to happen.