Do you charge your client for the Visa fee? When I added the 3% charge to my contract for using Visa, clients were not willing to pay this extra rate. 3% of a large booking is a lot to absorb.

What do others do? I used to pay the rate myself out of my commission, but am not willing to do it any more. Should I just eat it anyway? Nancy Tice, Northwest Artist Management, Professional Musicians for All Occasions.

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Permalink Reply by RTC PhotoWork on November 23, 2010 at 8:23pm

It is a high amount to absorb. Raise your prices to make up for that 3%, so that you have a pricing structure that covers the cost. Consider it a part of your outgoing costs like the rest of your hard costs doing business. It is typical practice to include merchant service/credit card fees in the costs you base your prices on.

Example: A few years ago credit card companies raised what they were charging businesses. At the time, I was working for a fast food restaurant on the day the POS systems were updated to reflect the restaurant's new prices. I can't tell you how many (regular) customers I had to explain the cost change to. Simply put, the restaurant had to account for the added outgoing costs in order to maintain their profits. Some orders were a 3 cent higher, and larger orders ended up being a few dollars more. Initially there were customers that weren't happy, but most understood that it had to be done. It's what the business had to do.

It's generally not so much of a raise in your prices that you should lose your client-base as a whole. Just make sure not to itemize it in any of your contracts as "credit card fee." (No client wants to hear they are being specifically penalized or targeted.)

It's a choice whether you want to eat that amount or maintain your profit margin. I would encourage you to maintain your profit margin.

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Permalink Reply by Molly Burling on November 28, 2010 at 10:03am

I agree with the above. Put it in your overall price. Now is a great time to up your price a Tad... I just did a cost comparison on my competitors and noticed that I was the lowest in town so I didn't mind raising my prices to cover the cost of excepting credit cards.

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Permalink Reply by Heather Vaughn on November 29, 2010 at 2:13pm

I know it's common for vendors to charge the 3%. As a wedding planner, I looked into whether it was legal to charge the cardholder because it is a pain to take the 3% and you can probably work around it with "convenience fees" which then needs to be charged on all further transactions but here is Mastercards rules on it (below). Since it is considered a violation I would just be cautious and look into this a little further. Increasing your service cost is probably your best bet. Hope this helps!

"5.11.2 Charges to Cardholders
A Merchant must not directly or indirectly require any Cardholder to pay a surcharge or any part of any Merchant discount or any contemporaneous finance charge in connection with a Transaction. A Merchant may provide a discount to its customers for cash payments. A Merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used, or as the Corporation has expressly permitted in writing. For purposes of this Rule:
1. A surcharge is any fee charged in connection with a Transaction that is not charged if another payment method is used."

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Permalink Reply by L & S Classic Limousine LLC on November 30, 2010 at 11:49am

We do not charge clients for using VISA (or MasterCard or AMEX). Personally, I think it's better to charge a credit card and be assured the payment is good, than worry about checks being returned for insufficient funds or closed accounts. Besides, those charges should have been part of your business plan when you determined what your were going to charge for your services. A certain percentage of credit card payments should have been assumed as part of your cost of doing business - just like other overhead costs like telephone, website hosting, etc.

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Permalink Reply by Classy Transportation, LLC on November 30, 2010 at 12:22pm

I Absolutely agree. As I mentioned in a another post, only hardship expense is an exception. A Hardship expense is one that is unexpected and directly affects profitability. For example, let's say the price of fuel suddenly went to $5 per gallon and you had to travel 200 miles to the client site. They would understand a fuel surcharge being added under those conditions.

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Permalink Reply by Rev. Johnny Erato on November 30, 2010 at 11:57am

If a couple prefers to pay their deposit by credit card, I ask for $100 on PayPal. This costs me $3.20. The balance of the ceremony fee must be paid the day of the ceremony or prior by cash, certified check or money order. I have never experienced any resistance to this policy.

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Permalink Reply by Chris Bryan on November 30, 2010 at 12:15pm

I accept credit cards through Paypal which adds a 3% fee, when clients ask if they can pay with credit card I tell them that they can, but that there will be a 3% fee added, most then choose to pay with cash. I won't raise my prices for the two clients per year that absolutely have to pay with credit card, the other option is to turn away those two clients.

I wasn't aware of Mastercard's rule though, I guess I'll have to start calling it a convenience fee.

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Permalink Reply by Classy Transportation, LLC on November 30, 2010 at 12:15pm

Processing payment is part of the cost of doing business and is part of your on-going operating expense. It will really hurt your business if clients have to absorb part of your operating costs. You either rise your price or lower your profit margin to offset the cost.

Clients usually don't mind paying for or sharing the costs of "Hardship" expenses. A Hardship expense is one that is unexpected and directly affects profitability. For example, let's say the price of fuel suddenly went to $5 per gallon and you had to travel 200 miles to the client site. They would understand a fuel surcharge being added under those conditions.

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Permalink Reply by Capcatchers on December 1, 2010 at 10:33am

Why don't you charge more for the fee and give them a 3% discount if paying by cash or check? That'll make them want to pay to get that discount, and they won't feel like they're being up-charged.

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Permalink Reply by Ryan Draper on December 5, 2010 at 10:30pm

Unfortunately, I haven't found a way to be able to directly charge customers to cover this fee...an explicit charge is usually considered a violation of the merchant services agreement. The only places, at least in Tennessee, that can charge a surcharge are the government and non profits. Really though, it should just be included as a part of your pricing structure on the front end because it is one of your costs of doing business. Doing this allows you to keep your margins and actually make a little more when people pay with cash or check. If you just like having cash around, you can even offer a 3% cash discount (which doesn't violate merchant services agreements) as an incentive to use cash instead of a credit card. One last thing about the cash discount though...it's important to find a way to clarify that just because you are offering an incentive to pay with cash, that doesn't mean you're planning on being unethical (not reporting the business, not paying sales tax, etc.).

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Permalink Reply by Alan Dodson on December 6, 2010 at 12:53pm

If you cant accept credit cards without raising your rates, you are not charging enough. Treat your business like a business and charge an appropriate professional fee that takes into account ALL of your costs of doing business including credit cards, insurance, licenses etc. One of the biggest problems we have in the event industry is too many people are not charging appropriate professional fees because they think they have to compete with price rather than quality and outstanding service. I am sure this post will irritate a few people, but it is the truth. This is a HUGE problem in the DJ/Entertainment Industry. Far too many entry level DJ's that are charging super low prices to get business because they do not have the skill and experience to compete on merit. This is also seen more and more with photography since fantastic cameras are within the price range of just about everyone now.