The Impact of Dual Pricing and Surcharging

While card processing fees continue to impact businesses profit margins, many merchants are implementing strategies to offset these costs. Two notable methods are dual pricing and surcharging. Understanding the differences between these two approaches is vital for selecting the one that best aligns with your business model and customer expectations.

What Is Dual Pricing?    

Dual pricing displays two prices for a product or service. The lower price represents the cash price, and the higher price represents the non-cash (credit and debit card) price. This model transparently passes the card processing fee to customers who choose to pay with cards. It offers a discount to customers who pay with cash and offers flexibility for their preferred method of payment. For example, an item might be listed at $50 for cash payments and $52 for non-cash payments. This strategy complies with card brand guidelines when implemented properly and allows businesses to strengthen their profit margin.

What Is Surcharging?

Surcharging is an additional fee added to a transaction when a customer pays with a credit card to cover the processing fee. This model clearly passes the fee to customers who pay with credit cards. For example, a $50 transaction may have a 4% surcharge, which would make the total transaction $52 for customers paying with a credit card. This approach complies with card brand guidelines and allows businesses to improve their profit margin. Surcharging is restricted or banned in some states and has restrictions on certain card transactions.

Customer Impact

Customers appreciate the ability to receive a cash discount with Dual pricing. However, some customers have shared their frustration of paying more to use their credit and debit cards. In regard to Surcharging, customers appreciate the ability to use their preferred method of payment. Some customers have expressed their frustration with an additional fee being added to their credit card transactions.

Both dual pricing and surcharging aim to lessen the impact of credit card processing fees on businesses. However, dual pricing offers greater transparency. While surcharging can be easier to implement, it carries legal risks. When choosing between these two strategies, consider your customer base, card brand and state regulations, along with the potential impact on customer satisfaction. Implementing the right approach can lead to improved profit margins and a more transparent pricing structure for your customers.

It is critical to work with a Certified Payments Professional to ensure Dual pricing and Surcharging are implemented properly in accordance with Card Brand rules and regulations. For personalized advice on implementing Dual pricing or Surcharging in your business, feel free to contact our team for a consultation with a Certified Payments Professional at info@closeknitconnections.com or call 1-888-244-4052.