One-Third of U.S. Small Businesses Now Add Credit Card Surcharges

A growing number of small businesses in the U.S. are passing credit card processing costs onto customers, despite the potential impact on customer satisfaction. According to a recent J.D. Power survey, 34% of small businesses now add surcharges when customers pay with a credit card.

J.D. Power’s survey, conducted from August to October 2023, included 3,841 small businesses and marked the first time the firm inquired about surcharge practices. The findings suggest that the rising prevalence of these fees could influence consumer payment preferences and satisfaction levels.

The National Retail Federation reports that interchange fees, commonly referred to as swipe fees, typically range from 2% to 4% of a transaction’s total value. To offset these costs, many merchants have turned to surcharges, but at the risk of lower consumer satisfaction. J.D. Power found that businesses implementing surcharges saw a 24-point decline in customer satisfaction scores compared to those that did not.

A LendingTree survey of 1,555 credit card holders in August 2023 supports this trend, revealing that 73% of respondents would reduce their credit card usage if they were regularly charged surcharges.

The increase in surcharges also aligns with a broader trend of businesses introducing service and convenience fees. Meanwhile, interchange fees have become a point of legislative and legal contention. States like Illinois have enacted laws restricting these fees, leading to legal challenges from banking and credit card industry groups. A U.S. District Court judge recently issued a partial injunction against the Illinois law, preventing its application to national banks and federal savings associations.

As small businesses navigate the costs of credit card transactions, the debate over swipe fees and surcharges is likely to continue, shaping both industry practices and consumer payment habits.