Starting a business brings in a world of choices and it can sometimes be a bit overwhelming as you begin to put everything in place. How you accept payment is one of the more confusing parts of the process because of the overwhelming amount of choices in the market. . One often overlooked yet powerful strategy is the implementation of surcharging, which can significantly boost profitability from the get-go. As credit card processing fees continue to climb, surcharging offers a viable solution to offset these costs, ensuring that your pricing remains fair and transparent. By adopting this approach early, startups can not only enhance their cash flow but also build a robust financial foundation that supports long-term growth. In this post, we will explore the compelling reasons why surcharging should be a cornerstone of your business strategy, highlighting its benefits for maintaining competitive pricing and fostering customer trust.
What is Pass-the-Fee?
Pass-the-Fee is a pricing model that allows businesses to pass the cost of credit card processing directly to the customer. This additional fee typically ranges around 3%, which is about what businesses pay to process credit card payments through platforms like Stripe and PayPal.
Instead of absorbing the cost or increasing your prices across the board, Pass-the-Fee lets you pass these costs directly onto customers who choose to pay by credit card. This creates a fairer pricing structure where only those who use credit cards bear the cost of the transaction.
Why Should I Implement Pass-the-Fee?
Cover Your Credit Card Processing Fees Without Raising Prices
For new businesses, keeping your pricing competitive is crucial. With Pass-the-Fee, you avoid increasing your prices to cover processing fees. Instead, credit card customers pay the small surcharge directly, while cash or debit users continue to pay the base price for your product or service.
This strategy ensures that you don’t penalize non-credit card customers with inflated prices. Instead, the additional fee is applied only to the customers who opt to pay with a credit card.
Improve Cash Flow
Cash flow is crucial to the health of any business. When you’re processing credit card payments, the associated fees can quickly add up and impact your financial stability. By passing these fees onto your customers, you can maintain steady cash flow without the stress of absorbing the costs yourself.
This approach helps eliminate the uncertainty that often comes with traditional payment processing models. By integrating Pass-the-Fee, you create a more predictable financial environment, ensuring that your business remains financially fluid and free from the unpredictable nature of transaction-related expenses.
The High Cost of Credit Card Processing Fees
How These Fees Drain Your Profits
Credit card processing fees are an unavoidable reality. However, the growing cost of these fees means that they can quickly eat into your bottom line. For instance:
- A business processing $50,000 a month at an average 2.4% processing fee is paying $1,200 in fees every month.
- Over the course of a year, that’s $14,400 lost to transaction fees.
This is money that could be reinvested into growing your business, not disappearing into processing fees. Pass-the-Fee gives you a way to reclaim that money and keep your finances intact.
Avoid Unfair Pricing Practices
Without passing the fee, businesses often raise their prices across the board to cover the cost of credit card processing. This forces cash and debit customers to effectively subsidize credit card users, which can feel unfair. Pass-the-Fee corrects this imbalance by making credit card users pay for their choice of payment method.
The result? A fairer, more transparent pricing structure where customers understand exactly what they’re paying for.
Real-World Example: How a Marketing Agency Benefited from Pass-the-Fee
A new marketing agency focused on establishing a strong financial foundation for growth. After consulting with our team, they decided that implementing a surcharge solution was the best way to offset credit card processing costs and protect their margins from the start.
A year into using this model, the results have been clear. Not only have they successfully kept their costs low in comparison to new businesses on a traditional payment model, but they’ve also streamlined their payment process using Rescue’s QuickBooks integration. This has saved them valuable time and reduced manual effort, allowing them to stay on top of their finances without added stress.
With a transparent pricing structure in place, their clients appreciate the clear approach to payments. The agency has built a solid, reliable system that supports their ongoing growth and ensures they can focus more on their business, not the financial complexities.
“Rescue made managing payments so much easier. We didn’t waste time figuring out hidden fees or payment holds, it let us focus on what really mattered – doing our job”
Pass-the-Fee + Rescue Payments: A Powerful Solution
Implementing Pass-the-Fee is just one piece of the puzzle. You also need a reliable payment processor to keep everything running smoothly. This is where Rescue Payments comes in. It helps businesses reduce the risk of delayed payments and ensures cash flow remains consistent.
What makes this even more powerful is the ability to integrate Rescue Payments with your existing systems. Whether you’re using tools like QuickBooks or Xero, these integrations create a full solution, allowing your business to run efficiently from day one. Combining Pass-the-Fee with Rescue Payments ensures that you’re not only managing your payment processing but also keeping your financial operations streamlined for long-term success.
Key Benefits of Pass-the-Fee
- Offset Credit Card Processing Fees: Ensure that only credit card customers cover the cost of processing fees.
- Better Cash Flow: Avoid financial strain and improve cash flow by passing fees directly to credit card users.
- Fair Pricing: Maintain transparent and equitable pricing without penalizing cash/debit customers.
- Scalable: As your business grows, so does the need to offset processing fees. Pass-the-Fee grows with your business.
Is this Right For Me?
If you’re a new business owner, it’s time to stop absorbing the costs of credit card processing. Pass-the-Fee is the solution. It ensures that credit card users bear the cost, keeps your pricing transparent, and helps your business stay financially healthy. Don’t wait for the fees to eat into your profits. Implement Pass-the-Fee today and start managing your financial future more effectively.
Have you considered it for your business yet? If you’re still on the fence, try here: Is Surcharging Right For My Business.
