Five Reasons Why Business Owners Should Not Pass on Credit Card Fees to Customers

Posted by Rick Miller | Jun 20, 2024 | 0 Comments

Can you imagine a world where a business owner would charge their customers a fee for using their credit or debit cards to buy items at their store?

Imagine no more because those days are here and many small businesses are taking the opportunity to charge clients who chose to charge their purchase to their preferred piece of plastic.

Several credit card processing companies have been marketing the idea of “passing the credit card fee onto your customers,” and I'm here to say that this might be the worst idea of client engagement I have ever heard. 

Here are five reasons why you should not charge your customers extra fees when they whip out their plastic at your establishment.

1. Profit and loss envy

I completely understand why a business owner might make this election. Like most good bookkeepers, we track a separate expense line on our client's Profit and Loss for credit card convenience fees. This amount stands out like a sore thumb and many business owners begin salivating at the idea of this cash being funneled back to their pockets.  

For context, I looked up the average fee for a small dining establishment. With gross sales of around $500,000, their total credit card fees were just under $16,000 for the year. What business owner wouldn't love the opportunity to pocket an additional $16,000?* This could replace an aging machine, provide some pay increases, or maybe afford the owner a little well-deserved vacation! But is it as easy as just jacking the price up on the credit card machine? Let's think about this a bit deeper.

*After-tax impact would net the owner $10,520 of Distributable Net Income (DNI).  

2. Customers buy more with a card

Every business owner looks for ways to increase revenue and wasn't this one of the reasons why you started accepting credit/debit card payments in the first place? According to, customers will spend 12 to 18% more per transaction when using plastic instead of cash. Think about it: Would you prefer to cut 15% off your bottom line just to avoid plastic? Probably not.


3. Cash isn't as “free” as you think

Retailers who accept cash-only payments face several hidden costs that can directly impact their business's bottom line, a few of these hidden costs (or risks) include

  • employee theft
  • external theft
  • costs of surveillance systems to combat theft
  • time spent counting
  • reconciling and depositing cash
  • balancing cash drawers
  • bank fees (believe it or not, cash management is why branch banking has become so expensive)
  • loss of sales from people (like me) who prefer using plastic over cash
  • counterfeit loss
  • proper record keeping
  • accounting and change management


While cash transactions may seem straightforward overall, they come with a variety of hidden costs that can affect your bottom line and operational efficiency.


4. You already increased your prices when you started taking credit cards!

Like many business owners 20 years ago, I noticed that the fees of taking credit cards were eating into my bottom line. At that time I made one simple adjustment: I raised my prices by 5% and rounded up to the next whole dollar. I made this adjustment many years ago. By making that adjustment years ago and adjusting my prices for inflation, I have already accepted the fees as a part of my operational reality. 

I will gladly pay (and deduct) the credit card processing fees because ultimately my clients are happy and I'm thrilled that my systems automatically reconcile these transactions with no effort on my part.


5. Customers (like me) will intentionally avoid you because you charge.

I live near Midland, Michigan and many Mom and Pop restaurants around here charge the added convenience fee when using a credit card. When I find myself in these situations, I prefer to reach for my emergency $100 to avoid paying the discretionary fee. I find it appalling that the restaurant owner will then ask me if I have any smaller bills. 

I feel like I'm darned if I do and darned if I don't, but I only go there when someone in the family insists on visiting this establishment. I refuse to go out of my way to patronize a business that looks for ways to penalize me as a paying customer.

As a matter of principle, I will go out of my way to intentionally thank business owners who choose not to charge a fee for using my card.  


Discount instead of charge!

If you've read my rant and still prefer cash, here's an idea: Instead of penalizing–I mean charging your customers who prefer to use a card–why not offer a discount to your customers who use cash (or write a check for that matter)?   

This will encourage your customers to make decisions based on your operational preferences and not punish your customers for doing business with you.

About the Author

Rick Miller

Tax Matters - Advisory Team Lead


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