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Key takeaways

  • Credit card processing fees explained: Understand what makes up these complex fees, from interchange fees determined by credit card associations to the fixed percentage assessment fees by networks, and the diverse fees charged by payment processors. 
  • Cost implications for merchants: Find out how credit card transaction costs can fluctuate, influenced by variables like card type and the payment processor’s unique markups. 
  • Legality of credit card surcharges: Learn about the legalities surrounding credit card surcharges, including the varying state laws and restrictions imposed by major card networks. 
  • Surcharge versus convenience fee: Know the crucial distinctions between surcharge and convenience fees, offering insights into which fees might apply to different payment scenarios. 
  • Communicating surcharges to clients: Get expertly crafted email templates and communication strategies that ensure your clients are well-informed about any surcharge changes. 
  • Pros and cons of surcharging: Explore the advantages and potential pitfalls of passing credit card fees to clients, helping you make a well-rounded decision for your business.
  • Implementing surcharges effectively: Get a detailed roadmap on how to effectively set up a surcharging program, from notifying relevant parties to configuring your payment systems.

In the digital age, convenience is king. 

Your clients are frequently reaching for credit cards when settling invoices so they can pay quickly. 

This is a fairly easy process on the client’s side – especially with the rise of digital wallets – but it does create a conundrum for professional service providers such as accountants, tax professionals, and digital marketers: 

Should you absorb the associated credit card fees or pass them on to clients? 

This article delves into the hotly debated topic of credit card surcharging and its implications for both professionals and their clients. 

Related article: Tips to increase cash flow using Apple Pay and Google Pay

What are credit card processing fees?

Credit card processing fees are fees that are charged to merchants (for example, service providers, retailers, and so on) to cover the costs of credit card processing. 

Credit card processing fees (sometimes called credit card merchant fees or merchant services fees) are levied by the credit card networks, such as Visa, MasterCard, American Express, and Discover. 

These fees are split among the card-issuing bank, the credit card network, and the merchant's payment processor.

The fees for credit card transactions can be broken down into the following components:

Interchange fees. These fees make up the bulk of credit card processing fees. These are set by credit card associations, and the exact amount will depend on factors like card type (credit, debit, rewards, or corporate cards) and transaction type (online or in person).

Assessment fees. These are smaller, fixed percentage fees charged by the credit card networks per transaction.

Payment processor fees and other merchant fees. These are the fees charged by the payment processor for their services. It can be a combination of per-transaction fees and monthly fees. Markups and pricing models will vary across credit card payment processors.

Additional merchant fee. Depending on your payment processor or merchant services account, you may be subject to additional fees, including statement fees, monthly minimum fees, equipment rental costs, and so on. (Note: Beware of hidden fees charged by your merchant account provider.)

How much do credit card fees cost?

As you may have guessed, credit card fees can vary from one transaction to another. That’s because there are so many factors that affect these fees – from the type of card used to the processor’s markup.

That being said, in 2023, The Motley Fool reports that the total credit card processing fees that merchants pay range from "1.15% + $0.05 to 3.15% + $0.10 in interchange fees plus an additional 0.13% to 0.17% in assessment fees." 

(Note that these figures don’t include your payment processor's markup.)

Credit card surcharges are legal in many states. But laws do differ depending on your location, and these are subject to change, as Credit card surcharge laws by state explained shows. 

Bear in mind that there is a cap on how much you can surcharge. Mastercard limits surcharging to 4% while Visa caps surcharging to 3%.

Also, you cannot add a surcharge fee on to a debit card or prepaid card transaction, and your surcharge should only cover the actual cost of payment processing. In other words, you’re not allowed to profit from surcharging.

It’s also worth noting that surcharging laws can vary from state to state. For example, in Maine, you can implement surcharging as long as you communicate the credit card price when quoting your prices. 

Meanwhile, in Minnesota, merchants must inform customers of credit card fees using signage and orally at the point of sale. 

Be sure to review the laws and regulations in your state so you can comply accordingly. 

Surcharge or convenience fee: What’s the difference?

They may seem similar at first glance, but there are some crucial differences between surcharge fees and convenience fees

Credit card surcharges, as discussed, are fees that are meant to offset the costs of payment processing. These fees only apply to credit card purchases. 

On the other hand, convenience fees are charged for the convenience of a particular payment method that's not standard for the business. Unlike credit card surcharges, which are tied to credit card transactions (and charged as a percentage), convenience fees are a flat amount. 

An example of convenience fee is when a customer pays their utility bill using a credit card rather than by mail or in person. 

In this scenario, the flat fee compensates for the added convenience of over the phone transactions, which might entail additional operational costs for the business, such as staffing a call center.

Should you charge convenience fees? 

That depends. If you're offering a genuinely convenient payment alternative that incurs additional costs for your business, it might be justified. Otherwise, you might want to steer clear from charging unnecessary fees to your clients. 

The advantages and disadvantages of credit card surcharging for pro service providers

The answer to whether or not to implement surcharging depends on your business and clients. 

Like most important decisions, there are a number of advantages and disadvantages to surcharging. Let’s explore them below. 

Pros of surcharging or passing fees to clients

  • Passing on credit card fees to customers or clients helps you save money and recoup expenses. The main benefit of surcharging is it helps you lower your costs.

    Remember that credit card fees can run anywhere from 1% to over 3% of your transaction volume. While these figures may seem small for some people, they can add up significantly, especially for service providers. 

    Professional service providers like accountants and digital marketing agencies typically charge thousands of dollars per transaction. This means that you could be paying hundreds, if not thousands of dollars in payment processing fees. 

    Surcharging enables you to offset those costs, so you can have a healthier bottom line. 
  • Surcharging can promote transparency. When implemented properly, surcharging could pave the way for more open and transparent client communications. 

    Discussing credit card fees makes your customers aware of the costs of doing business, which can then lead to a greater understanding and appreciation of your pricing structure. This, in turn allows them to make more informed decisions around what payment methods to use. 
  • You can have more revenue predictability. Surcharging can give you more revenue and profit predictability, because it mitigates the variable costs associated with each credit card processing fee. 

    When you don't have to worry about payment processing costs, you can forecast your revenues and expenses and plan accordingly. 

Cons of surcharging or passing fees to clients

  • Surcharging may lead to dissatisfied customers. Depending on how you implement your surcharging program, clients may feel like they’re being nickel and dimed, which could curb client satisfaction.  
  • You could put yourself at a competitive disadvantage. Implementing surcharging can also put you in a sub-optimal position, particularly compared to competitors who aren’t surcharging their clients. 
  • Passing on credit card fees to customers and clients can add complexity to your business. There can be complexities in implementing credit card surcharges, especially around compliance with card issuer rules and local laws. 

As mentioned above, you need to be aware of any laws and guidelines that apply to your business. Do you need extra signage? What's the right way to communicate the policies to your clients? Be sure to iron these out when implementing a surcharging program. 

Implementing and communicating surcharges to your clients

If you’re set on implementing a surcharging program, but concerned about how your clients will react or the impact on your business, here are a few tips to help smooth the transition.

Tell your customers about surcharging upfront. You want to communicate your surcharging program clearly and transparently from the offset. This prevents issues around clients being caught off guard with extra fees. 

It’s also helpful to educate your clients about the payment processing fee they would need to pay, so they can better understand why you’re passing on credit card fees to customers. 

The following email templates can be used as a starting point to communicate these changes: 

Template to introduce a card surcharge fee for existing card payments

Subject: Important update: New surcharge for card payment methods

Hi {{ client.name }},

Hope you've been well! 

We wanted to reach out to let you know about some upcoming changes to {{ practice.name }}’s payment processes that might affect the way you make payments to us.

As of [Effective date], card payment methods will incur a small card processing fee of [X%] moving forward. Here are the key details to be aware of:

Effective date: [Date when the fee will start]

Card processing fee: [Specify the percentage or fixed amount of the surcharge]

Payment methods affected: Card payments

If you wish to update your payment method to an ACH payment method before this date, please use the Update Payment Details button at the top of this email to provide and save your preferred method for future invoices.

{{ Practice.name }} would like to thank you for your continued support, and if you have any questions, as always, please don’t hesitate to contact us at [Customer support email or phone number].

Kind regards, 

{{ practice.name }}

Template to announce credit card payment acceptance and surcharges

Subject: Important update: We are now accepting credit card payments

Hi {{ client.name }},

Hope you're well! 

We wanted to reach out to let you know about some exciting upcoming changes to {{ practice.name }}’s payment processes.

As of [Effective Date], {{ practice.name }} will now be accepting credit card payments moving forward.

If you wish to update your payment method please use the Update Payment Details button at the top of this email to provide and save your preferred method for future invoices.

Please note: Card payment methods will incur a small processing fee of [X%].

{{ Practice.name }} would like to thank you for your continued support, and if you have any questions, as always, please don’t hesitate to contact us at [Customer support email or phone number].

Kind regards, 

{{ practice.name }}

Use the right payment solution. If you decide to implement surcharging, use a payment solution that makes it easy to do so. Ignition, for example, has a surcharging feature that’s available in the United States and Australia that enables you to choose your surcharge rate. 

When these fees are paid by clients, it’s applied to your account as a credit against your Ignition processing fees. 

How to implement credit card surcharges when billing clients

Setting up your surcharge program takes a series of steps. 

Be sure to understand and follow the necessary guidelines to ensure your business is compliant at all times. Consider the following. 

Notify the right parties

Before passing on credit card fees to your clients, you must notify your acquirer and credit card networks (most require 30 days notice) before implementing your surcharging program. The exact steps may depend on your acquiring bank, as well as the credit card network. 

For Visa, you need to submit a notification form on their website

The process is similar with Mastercard, which has an online Merchant Surcharge Disclosure Form. Some of the information that you need include:

  • Basic business and contact details (name, email, business info, and so on). 
  • Your acquirer or processor name.
  • Your payment channels.

Configure your credit card payment platform and hardware

The next step is to set up your credit card hardware and software to accommodate your surcharging policies. 

If you accept credit card payments in person, then this step will involve configuring your credit card terminals and ensuring this is compliant with surcharging laws. 

If you take online payments, then you need to set up your payment platform to ensure customers are charged accordingly. 

The specific actions you’ll take at this stage depends on the hardware and software that you’re using. 

Be sure to consult your payment platform and payment processor or merchant service provider on how to configure your payment systems correctly.

If you’re using Ignition, you can learn more about setting up surcharging here.

Disclose your surcharging policies

Don’t forget to disclose your surcharging policies to your customers. Depending on how you interact with your clients, you may need to display signage in your place of business or on your website. 

Visa recommends saying something along the lines of:

We impose a surcharge of ____________% on the transaction amount on Visa credit card products, which is not greater than our cost of acceptance. We do not surcharge Visa debit cards.


We impose a surcharge on credit cards that is not greater than our cost of acceptance.

How to pass credit card fees on to clients with Ignition

As mentioned above, Ignition gives you the flexibility to implement surcharging. Passing on credit card fees is easy using our platform, and you can do it with the following steps

1. Set up surcharging in your account. You can do this by navigating to Settings > Payments. Then under "Card fees" turn on "Pass card processing fees”.

2. Set your surcharging rate. Enter your surcharging rate into the “Fee rate” field. At Ignition, we recommend 3% for US merchants.

3. Read the fine print and confirm. Read the legalities and confirm that you understand your obligations when using this feature. As the merchant, it’s your responsibility to comply with the rules that apply to your business in your region.

4. When you’re good to go, click “Turn on fees”.

5. Once confirmed, your surcharge rate will be applied for all clients when paying by card.

6. You can turn card processing fees on or off for individual clients, at any time in Ignition.

How surcharging works from your client’s perspective

On the client side, when card processing fees are turned on, they will see an info-bubble that discloses your credit card surcharging rate. This will appear when they enter their payment details. 

Your surcharge fee will also be displayed on Ignition’s invoice emails and payment receipts. But it will not be pushed down to the connected ledger as a separate line item.

Where to from here

Navigating the ins and outs of credit card surcharges can be tricky and it’s up to you and your business needs as to whether you choose to pass on these fees to your clients.

If you do choose to go ahead with it, adding a credit card surcharge to transactions can offset processing costs, which enables you to save money and improve your bottom line. 

As long as you carefully consider your options, understand the laws in your region, and properly set up and disclose your policies, implementing surcharging should be a fairly straightforward process. 

See how you can pass on card fees in Ignition. Want to find out more about how Ignition can help you get paid effortlessly? Watch our on-the-spot demo.

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Francesca Nicasio
Francesca Nicasio

Contributing Author 

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Published 13 Nov 2023 Last updated 19 Mar 2024