Which is the better offer for your customers – a cash discount, or a credit card surcharge?
Both are strategies to pass credit card processing fees on to the customer. Of course, many businesses willingly make the convenience tradeoff, seeing the fees as a cost of doing business and the convenience of accepting credit card payments.
Changing regulations have made it easier to pass those costs on to customers as a credit card surcharge, but what do customers prefer?
That depends on your business, what you sell, how you sell it, and your competition. As marketers, we always recommend a discount rather than a surcharge. This approach helps with making the original sale, and for inspiring repeat business and customer loyalty. Here are a few examples:
No bagels for me
My favorite bagel place added a credit card surcharge, without telling the customers. I found out when we overheard the cashier answer another customer’s question, prompting me to take a closer look at the receipt. They are charging a 4% surcharge for credit card payments, with no clear signage for customers. Rather than giving customers information and a choice, it felt like a scam. That’s not the way to reward customer loyalty.
Book it
A private campground in Colorado makes it clear on their website that they give a 10% discount if you pay by cash or check. They kindly explain that they are a small business and the processing fees make it harder for them to stay in business, so they reward customers who pay in their preferred method. I happily wrote a check and felt instant loyalty and goodwill.
I approve this surcharge
A retail store down the street from the campground rang up my purchase, with a clear sign at the register stating, “Please note there is a 3% surcharge for credit card payments.” The salesman gave me my total, and when I handed him my card, he politely told me about the surcharge and let me know the new total. I would have preferred a cash discount, but I appreciated that I was given the choice. I will, however, check with a competitor before I purchase there again.
As I shared these experiences with friends and family, the reactions were similar:
- Don’t hide the surcharge. Hiding it creates negative feelings toward the business.
- Let me know in advance so I can make my own decision.
- Cash discounts win over surcharges every time – even if the customer still decides to pay by card.
- Customers don’t want to be penalized for using common payment methods.
How are you handling credit card payments in your business? And more importantly, how do your customers feel?
