Minimize costs of card acceptance without surcharges

Your Business Credit columnist Elaine Pofeldt
Elaine Pofeldt is a journalist whose articles on entrepreneurship and careers have appeared in Fortune, Working Mother, Money and many other publications. She is a former senior editor at Fortune Small Business magazine and an entrepreneur herself, as co-founder of, a website for independent professionals. She writes "Your Business Credit," a weekly column about small business and credit, for

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Question Dear Your Business Credit,
I own a business in Texas. We provide a service to our customers but don't sell merchandise. Our services are nationwide.

We had customers asking to pay their invoices by credit card, so we accommodated them by signing up with a credit card processing vendor. Of course, this vendor charges us a processing fee with every transaction, regardless of the amount. It is starting to eat into my profit, so I'd like to recoup these fees by invoicing our clients for the processing fees we are charged by this vendor, stating it's a convenience charge.

Is that legal? If not, how can we recoup these fees? If we have to just "eat" these fees, we are talking thousands of dollars per month. Any suggestions other than stop accepting credit cards? -- Cynthia

Answer Dear Cynthia,
You're not the only merchant to look at credit card processing fees and cry "Ouch!" But the good news is there are ways to offset some of the fees you're paying.

You mentioned you are in Texas. In your state, you cannot add a surcharge to credit card purchases. Texas is one of 10 states that bans surcharges, according to Visa's merchant surcharging information page.

The Texas Attorney General's website elaborates: "In Texas, a business can not penalize you for paying with a credit card. Businesses that add a surcharge to those who pay by credit card might be violating provisions of the Texas Finance Code." The AG's office encourages people who believe a business is charging extra for credit card purchases to file a consumer complaint with its office.

In case you're wondering, Texas also says you cannot add a surcharge to debit card purchases, according to the Texas Department of Banking. Such surcharges were banned under a law that passed in 2013.

Noticing a lot of confusion among merchants, the banking department published guidelines on how to interpret the ban on debit card surcharges in a business. (The department notes, "These Best Practices are an interpretive statement pursuant to Texas Finance Code §31.102, and are not a rule, but rather an administrative construction entitled to great weight.")

Although you can't add surcharges to debit or credit card purchases, I don't think you should stop accepting credit cards. Your customers have already told you they want to pay that way. You risk driving them away if you don't offer convenient payment methods.

One way to offset the cost of customers' credit card use is to sweeten the deal for customers who pay cash. The Texas Attorney General's site says, "Businesses can discount the regular retail price of an item for consumers who pay cash." You may have seen this practice used at gas stations.

The Texas banking department's guidelines say that when offering a discount for cash purchases, merchants should conspicuously advertise the regular retail price and the discount price for customers who pay cash.

Merchants should also make sure to check out card issuers' guidelines on offering discounts to make sure they don't run afoul of any. Visa says that merchants can offer customers a discount for purchases made by cash or check. MasterCard says that if a retailer "is dissatisfied with the acceptance costs it negotiated with its bank, that retailer has several options: It can provide discounts to those who pay with cash, check or other forms of payment; negotiate a different merchant discount rate with its bank; switch to a bank that offers more competitive rates; or choose not to accept MasterCard cards."

I would also suggest shopping around for a merchant processor. Sometimes switching to a new one can save you money.

For more information on credit card surcharges, check out my previous column on this topic, "Can my business add a surcharge for card-paying customers?." All merchants should stay alert to news reports in their state on credit card surcharges. State laws on this are in flux so it's important to keep on top of changes.

See related: A business may spurn debit cards, but why?, Can you ditch your merchant account for a better deal?, Understanding 'consent' to charge a card 

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Updated: 12-09-2018