Is Surcharging Right for Your Business? 

How would you like to reduce your processing fees to almost $0?

Sounds great, right? Surcharging allows some processing fees to be passed along to your guest (consumer) instead of you or your owners paying the fees. But it is complicated and isn’t for everyone. Let’s look at the pros and cons to see if it’s for you.

For many, many years the card brands prohibited merchants from charging a fee to consumers for using a credit card to pay. They didn’t want any penalty assigned to their electronic payment method that might encourage the consumer to choose a different way to pay. In 2013, after a federal court case settlement, Visa and MasterCard were required to allow surcharging by the courts. Discover followed suit.

But surcharging is highly complex – there are a lot of rules that a merchant has to follow and you need to be sure that you are set up with a processor and technology that will keep you compliant – and a decision that each merchant must make for themselves.

First, there are states that prohibit surcharging and their law overrules the Visa rules. The number of states has dropped from 10 to 4 in the past year and is likely to continue to change. But if you are in Colorado, Connecticut, Kansas, or Massachusetts, you cannot surcharge your guests. As laws continue to change, some additional states may be affected.

You can only surcharge on credit cards – debit and pre-paid cards are off limits. How are you supposed to know if the consumer is using a credit card? That is where you need to be sure that you have the technology and program in place to correctly identify card type and only surcharge on credit cards.

You cannot make money on surcharging – meaning that you cannot surcharge more than the interchange cost of accepting credit cards. Additionally, you cannot surcharge over 4%.

Will you lose bookings over guests being unhappy about the additional fee? This is an important question. The card brand regulations require you to alert the consumer about the surcharge before charging it. Offering alternative payment methods (debit, ACH, cash, check, depending on the situation) to clients who start to book but do not want to pay the surcharge allows you to still move forward with the booking. And those other payment methods all carry a much lower processing price tag for you as a merchant.

In the vacation rental industry, a benefit to surcharging is that it allows you to differentiate your management company from others that pass the processing fees – or part of them – to the homeowner. You might win more owner contracts by offering surcharging.

This is a decision that each merchant needs to make for their business. If you have questions or want more information, contact us at

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