Is adding a surcharge for electronic payments right for your business? Sure, it might save your business thousands in transaction fees, but what about your customers? How will they react?
With the right EFTPOS solution, it’s easy to introduce a surcharge that’s fair to you and your customers, and it can help keep prices down for everyone.
What is a surcharge?
When a customer pays you with a credit or debit card, there is a cost per transaction. You then have a choice: You can choose to absorb this as the cost of doing business, or you can pass on this cost to your customer.
Passing on the cost is done by adding a surcharge. This is a small fee you add on to a customer’s bill to help cover the cost of accepting an electronic purchase.
Done right, surcharging is simple, transparent and fair to all.
It’s a common practice in many businesses from bakeries to taxis. It’s so common customers often miss it, but you won’t miss the difference on your balance sheet. Choosing not to surcharge could be putting your business at a disadvantage.
Why adding a surcharge can be a good thing
✓ It can save a business thousands of dollars
Even though the cost for each transaction might seem low, it can quickly add up over a financial year. By adding a surcharge, you can scratch this expense.
✓ It can give your customers more choice
Adding a surcharge can allow you to accept cards you might have previously refused because of the high transaction costs; or get rid of any minimum spend limits. It’s now the customer’s choice and expense. If customers want to use cards that have higher rewards (and which usually carry higher transaction costs) they can, but it’s no longer coming out of your pocket.
✓ It encourages payment methods with lower transaction costs
When costs are presented clearly, it’s easy for customers to see the benefit of low-cost options like debit cards, over high-cost options like credit cards that offer rewards.
✓ It keeps prices down
As the Reserve Bank of Australia puts it: “By helping to hold down payment costs, the right to surcharge helps to hold down the price of goods and services charged to all consumers.” And no one’s ever heard of a consumer uproar over lower prices.^
By surcharging, businesses like Grocery giant Aldi today are able to offer a lower price for a products, and allow customers to save money by choosing a payment method with a lower cost.
What’s the best way to introduce a surcharge?
1. Be open with your customers
Be upfront with your customers about your surcharge, and you’ll be surprised how many are OK with it. Add it to your signage and sales material – for example as a note on the bottom of your menu or near your register. You could give customers notice in advance of implementing a surcharge.
Just consider most Aussies are happy to pay a little extra for shipping when shopping online. And why is that? Because we understand there is a cost and expect to pay it. You might even tell them where that money is going and how it benefits them, i.e. more staff on the weekends. etc.
“98% are happy to pay the surcharge. Customers don’t care as long as you provide good food and good service – that is what they want.”
– Kumar, Cafe Oliveto
2. Automate how you add a surcharge
Surcharging is now well-regulated by the ACCC, so make life easy for you and your customers. Set up your EFTPOS with Smartpay Zero Cost™ EFTPOS and there’s no guessing. It automatically applies an RBA acceptable surcharge for each different payment type.
This way, your customers know you’re always fair, and you know you’re always compliant.
3. Fine-tune the way you surcharge
If you’re set up with Zero Cost EFTPOS, you can tweak your surcharge to suit the way your business works. You might add a surcharge to credit cards but keep cheque or savings (debit) free. You can also choose to waive any surcharge for top customers to show them a little extra love.
4. Focus on your bottom line
Watching the odd customer walk because of a surcharge is tough. What’s not so tough is looking at your bottom line. If a solution like Zero Cost EFTPOS can save your business thousands, this could easily outweigh losing a single sale.
“The big push was the money we could save and how easy Smartpay made things – the surcharge is calculated for us.”
– Kendall, Financial Controller
Want to understand what drives the cost of your EFTPOS bill? Find out more about merchant service fees.
^Source: Reserve Bank of Australia