Why More Merchants are Passing on Credit Card Fees

Cambri

by Cambri Morris

Mar 31, 2023

Why More Merchants are Passing on Credit Card Fees

Cambri

by Cambri Morris

Mar 31, 2023

Why More Merchants are Passing on Credit Card Fees

Cambri

by Cambri Morris

Mar 31, 2023

More and more service-based businesses are using zero cost processing to accept credit card payments to avoid paying high credit card fees.

The Future of Zero-Cost Processing

As technology continues to advance, we have witnessed a significant shift toward a cashless society. In recent years, the economy has seen a massive surge in online transactions, and businesses have had to adapt to new payment methods to keep up with consumer expectations.

One payment method that has been gaining significant attention is zero-cost processing. Zero-cost processing is a convenient way for small businesses to accept credit card payments without paying processing fees.

Increasing Credit Card Use

While general sales across the board, including credit card sales, decreased during the pandemic, “consumers’ credit card debt increased by $46 billion in the second quarter of 2022…a 13 percent increase from…2021.” This means more and more consumers are back to shopping with their credit cards since the outbreak of COVID-19. Although many service-based businesses tend to rely on cash and check as primary methods to receive payment businesses have to keep up with customer payment preferences to stay competitive.

Technological Advances

“Electronic invoicing, or e-invoicing, has become the modern way to bill customers…. It’s more convenient for customers to pay with a digital invoice than it is to write a check,” said Colin O’Keefe of Merchant Cost Consulting.

Small businesses have to keep up with technology to stay competitive. Here are a few things small businesses are doing:

  • Keeping customer credit card information on file to make future purchases more seamless.

  • Using biometrics to complete purchases (i.e. fingerprints and facial recognition).

  • Offering a mobile payment option such as Allset Pay by Text.

  • Providing other contactless payment options such as QR codes or Near Field Communication (NFC).

  • Implementing AI to make personal recommendations, detect fraud, and provide analytics.


Overall, the digital identity of both the customer and the business is continually becoming crucial to the security and completion of the payment process.

Credit Card Fees and How Businesses Avoid Them

When customers use credit cards to make purchases, businesses typically pay transaction fees to credit card companies and banks. These fees can range from 1-5% of the transaction amount, depending on the type of card used and other factors. For small businesses with tight profit margins, these fees can add up quickly and have a substantial impact on their bottom line.

To offset these costs, some small businesses choose to pass credit card fees on to customers in the form of surcharges or convenience fees. This practice is legal in most states, but it is subject to certain regulations and restrictions.

While many other tactics exist to avoid credit card processing fees, none are quite as advantageous as zero-cost processing.

Not Accepting Credit Cards

Many businesses have been avoiding paying credit card fees for years by flat-out not accepting credit card payments. Service businesses are notorious for only accepting payment via cash, check, and peer-to-peer payment solutions like Venmo, CashApp, and Zelle, just to avoid paying credit card processing fees and keep more of their money. Their margins are tight and they need to keep all the money they can.

Increasing the Price for Credit Card Paying Customers

The other unspoken, but very common, small business practice is increasing the final invoice amount by 3~4% to offset the credit card fees. But to do that, an awkward conversation usually has to take place. The business has to tell the customer in person that they can pay with a credit card, but it will cost more.

Everyone is familiar with the small convenience stores that have a handwritten note on their credit card terminal stating that a 3% fee will be added to all payments made with a credit card.

Convenience Fees

With the introduction of DoorDash, Uber, and Airbnb, more and more consumers are familiar with and accept 'convenience fees'. This makes it more acceptable for small businesses to redirect credit card processing fees to their customers.

Impact on Customers

Here are a few reasons why more customers may be willing to pay credit card fees these days:

  • Increased convenience: Credit cards offer a fast and convenient way to make purchases, particularly online. Many customers prefer to use credit cards over other payment methods, and they may be willing to pay a small fee for the convenience of using a credit card.

  • Greater awareness of costs: With the rise of online shopping and price comparison websites, customers are more aware of the costs associated with different payment methods. They may be more willing to pay a credit card fee if they feel that it is a fair and transparent way to cover the costs of using a credit card.

  • Cashless society: The COVID-19 pandemic has accelerated the trend towards a cashless society, as more customers are avoiding cash payments to reduce the risk of transmission. This has led to an increase in credit card usage, and customers may be more willing to pay a fee to use credit cards for most purchases.

  • Reward programs: Many credit cards offer reward programs that allow customers to earn points or cash back on their purchases. Some customers may be willing to pay a fee to use a credit card that offers these rewards. These rewards programs often offset the cost of the fee.

  • Security: Many people use their credit cards because they offer a layer of protection to the consumer.

Zero Cost Processing Is a Better Way

As credit card fees continue to increase year after year, zero-cost processing becomes more appealing for small businesses. Zero-cost processing can help your business avoid paying those fees.

Based on what we see with companies using Allset, and depending on how many credit card transactions they process, small businesses can save anywhere from $3,600 to $36,000 each year.

Our Zero Cost Processing solution provides optionality to consumers so they don't have to pay a fee if they choose to pay via Debit or ACH. This ensures that customers who are averse to paying the credit card fee still have other options. Ready to accept credit cards without paying fees? Try Allset today for free!

Start using Allset for free

Join hundreds of other home service businesses and improve your customer communication today.

Start using Allset for free

Join hundreds of other home service businesses and improve your customer communication today.

Start using Allset for free

Join hundreds of other home service businesses and improve your customer communication today.