Credit Card Surcharges: Who Pays, Who Wins?
TOM HICKMAN | Professor of Marketing | Brenneman School of Business | Washburn University
Credit card surcharges are spreading through the service economy. For business owners, surcharges present a classic trade-off between recouping a few percentage points on each credit card transaction now, or risking alienating customers whose lifetime value far exceeds a single purchase. For customers, surcharges simply feel like a gut punch to their budget.
WHY OWNERS ARE TEMPTED
Processing fees and razor-thin margins are real pressures. For independent restaurants, salons, clinics and other service providers, each percentage point matters. Surcharging promises an immediate, visible offset to those costs. It’s an attractive, defensible move: “We’re just passing the cost of card payments on to customers who use them.”
WHY THE DANGER IS REAL
Short-term math can mask longer-term economics. Customers don’t react to a surcharge in isolation. They react to their overall experience and to how a business treats the moment of payment. Studies and merchant experience repeatedly show that customers view surcharges negatively. Many customers respond to surcharges by switching to competitors or returning reluctantly, dealing a crushing blow to the all-important positive word-of-mouth that drives future business.
Acquiring a new customer is expensive and keeping an existing one is far cheaper. Even a small bump in churn or a modest drop in repeat visits can wipe out any processing savings the surcharge creates. To make the tradeoff concrete, run the math for your own business.
MATH EXAMPLE
Customer acquisition cost: $200
Average revenue per customer over time (lifetime value): $2,000
Surcharge applied: 3% on a $100 credit card transaction = $3
If applying that surcharge drives away 5% of customers who would have otherwise returned, the business may lose customers worth $2,000 each. Losing one customer (or a small handful) quickly overwhelms the $3 saved on a single transaction. The point is that even a tiny surcharge can inflict sizable damage as dissatisfied customers often share their frustration with others, creating a multiplier effect through negative word-of-mouth that occurs outside the business’s control. This hidden, amplified backlash can quickly offset any short-term gains from the surcharge, making it far more costly than it appears.
BEFORE YOU SURCHARGE
If you’re weighing whether to add or keep a credit card surcharge, be candid about what you want to gain and what you’re willing to risk.
ASK YOURSELF
How price-sensitive are my customers, and how might that translate into lost revenue?
What does it cost to replace a lost customer, and how many might I realistically lose?
How noticeable will the surcharge be at the point of sale, and how might that influence customer perception?
If you can’t answer these questions with reasonable and defensible estimates, any surcharge implementation should be treated as a risky experiment.
TURN “NO SURCHARGE” INTO A MARKETING TOOL
If your choice is to not surcharge (or if you reverse a policy that added fees) you have a clear, underused marketing asset. Promoting surcharge-free credit card acceptance can differentiate your business in a crowded local market. Below are practical and innovative ways to leverage that decision.
First-Level Tactics
Where: PROMINENT MESSAGING
Place “No credit card surcharge” messages in visible locations such as your homepage, Google Business Profile, menus and storefront windows. Extend the reach with short, localized email and social media campaigns. For example, “Enjoy hassle-free payment with no credit card surcharges.” These placements ensure customers see the policy where they already interact with your business, reinforcing awareness and understanding.
How: PRICE FRAMING
Communicate the no-surcharge policy in a clear, customer-centered way such as, “We keep prices simple with no surprise credit card surcharges.” Framing the policy explicitly shows that your business has made a deliberate choice, rather than silently absorbing costs.
Why: BUILD TRUST
This approach demonstrates a customer-first philosophy, reinforcing transparency in pricing. By showing that pricing decisions are intentional and considerate of the customer’s experience, the business strengthens loyalty, enhances goodwill and differentiates itself in a market where stinging surcharges are increasingly common.
Next-Level Tactics
QUANTIFY AND SHARE THE MATH
Frame the no-surcharge policy as part of a fair-pricing philosophy. Show customers that instead of adding a 3% credit card fee, the business absorbs the cost to keep prices simple and fair. Make the savings tangible through small in-store displays or social media posts. Clear transparency reinforces fairness and shows that your pricing is intentional and customer-first. This serves as an immediate differentiator in a market full of frustrating surcharges. Over time, this clarity can strengthen loyalty and positive word-of-mouth.
LOCAL PARTNERSHIPS AND PROMOTIONS
Strengthen the no-fee message by teaming up with nearby businesses to create a “No-Fee Neighborhood” or “Fee-Free Zone” campaign. Joint ads and coordinated social posts can spread the message farther and reinforce a sense of community. For example, a coffee shop, salon and restaurant could cross-promote each other’s no-surcharge policies and offer a small perk for customers who visit multiple participating businesses. A coffee shop might even feature a seasonal drink inside the partner salon or restaurant as part of the collaboration. This turns a pricing policy into a shared neighborhood advantage and gives each business new, creative ways to advertise inside other participating locations.
USE THE POLICY FOR TALENT AND PR
A fee-free checkout can support both recruiting and public relations. Including the no-surcharge policy in hiring materials or onboarding signals a culture that values fairness and simplicity, which is something many job candidates appreciate. Local media or social posts that feature the policy can also frame the business as straightforward and customer-friendly, generating positive attention at little cost. In this way, the policy becomes more than a pricing decision; it serves as a clear, credible proof-point of the brand’s values and commitment to customers.
PAY IT FORWARD
A no-surcharge policy can also be creatively linked to community giving for businesses that are interested in supporting local causes or other philanthropic endeavors. While the business still pays the full credit card processing fee, that fee can serve as a simple benchmark for donations.
For instance, a business could donate 5% of the fee, or 15 cents for every $100. Over time, as revenue accumulates, this approach can result in a controlled yet meaningful contribution, such as $150 for every $100,000 in revenue. Businesses can adjust the percentage to match their existing philanthropic goals or historical giving levels, effectively backing into the amount they advertise as a percentage of revenue donated. This strategy turns a necessary business cost into a values-driven marketing opportunity, reinforcing customer goodwill and demonstrating a purposeful approach to pricing and community support, all while keeping transactions simple and transparent.
Payment policy is a small operational choice with outsized strategic consequences. Before adding a surcharge, ask whether that revenue is worth the risk to relationships you’ve already paid to build. And if you choose to keep prices simple and fee free, don’t treat it as an invisible accounting decision. Treat it as a deliberate strategy to win and retain loyal customers.
