Are Card Surcharges Your Venue's Best Move?

Weighing the Pros and Cons of Credit Card Surcharges

As hospitality businesses of all sizes continue to evolve in the digital era, adapting to new technologies and business models has become par for the course. One such adjustment that venues face is dealing with the costs associated with credit card transactions. A common tactic used by businesses (and one you may too be using) is to offset these costs by implementing a credit card surcharge fee.

Before introducing a surcharge on credit card purchases at your establishment, though, it’s essential to understand both the potential benefits and drawbacks of such a decision. In the points below, we delve into the world of credit card surcharges, providing insight into their pros and cons, evaluating their impact, discussing viable alternatives, and touching on some legalities behind surcharges.

The Benefits of Surcharging

One of the primary pros of surcharging is its potential to cover the costs associated with accepting credit card payments. Each time a credit card is used for a transaction, businesses incur a certain percentage fee charged by the credit card company. By passing a surcharge for credit card use, businesses can offset these charges, protecting their margins, and maintaining profitability.

Surcharging can also encourage customers to opt for cash or debit card payments, which often come with lower transaction fees as mandated by the ACCC. For your business, this can also be advantageous as it can reduce overall credit card processing costs.

The Drawbacks of Surcharging

While surcharging can undoubtedly help cover transaction costs, it isn’t without potential downsides. For starters, customers generally prefer fee-less shopping experiences. Implementing a surcharge on credit card purchases may discourage some customers and even prompt them to take their business elsewhere.

A second drawback is that all venues, including restaurants, clubs and pubs, must clearly disclose surcharge fees, which can necessitate extra signage, employee training, and potential updates to your point-of-sale system. This can clutter bench space, detract from the customer experience and lead to errors if not communicated properly. This is a pitfall for many businesses and some POS providers, as not all POS companies offer a fully integrated payments solution like Bepoz. By comparison, Bepoz’s all-in-one solution simplifies the process of complicated pricing and till balancing.

Evaluating the Impact of Surcharging

Before implementing a credit card surcharge, it's important to assess the potential impact on your business. This requires a thorough analysis of your sales data, customer preferences, and regional laws.

Start by evaluating your credit card usage rates. If a significant portion of your transactions are made using credit cards, a surcharge could have a substantial impact on your bottom line. However, it could also dissuade some of your guests.

In contrast, if credit card usage rates are low, the surcharge may not yield significant savings and could unnecessarily alienate customers. Some venues conduct a survey to test the waters using their loyalty app.

Surcharging Alternatives

If implementing a credit card surcharge fee doesn’t align with your business model or customer expectations, there are alternatives to consider. Some businesses opt to offer a cash discount rather than surcharging credit card transactions – this reframes the additional fee as a bonus for cash-paying customers, creating a more positive customer experience.

Others may choose to increase prices across the board to cover processing fees, maintaining a transparent pricing strategy for all customers.

Consequences of Excessive Surcharging

In terms of surcharging, certain rules are in place by the ACCC. For instance, the surcharge can’t exceed more than what it costs the business to use that payment method. Whatever the surcharge amount, the business must be able to show how they calculated it. More information on the ban on excessive payment surcharges can be read on the ACCC Website.

Navigating the world of credit card surcharges can be a complex task. While they may offer financial benefits to some businesses, the potential for customer backlash, legal restrictions, and operational complications make it a complex decision.

Always assess the potential impact of a surcharge policy on your venue and consider alternative strategies if necessary. Remember, the key to any successful business decision lies in understanding your guests' needs and creating a balance with your operational costs.

At Bepoz, we offer a customised solution that can make this decision significantly easier and neater for you. To get an in-depth understanding of payments, talk to our team at Bepoz.