Running a small cafe or restaurant means watching every dollar, and credit card processing fees can soon add up. Many businesses are hesitant to introduce a credit card surcharge for fear of a customer backlash. In fact surcharges are becoming common across many industries, and when implemented, they can save a small business thousands each year without upsetting customers.
The Legal Basics on Surcharging in Australia, New Zealand, and USA
Australia – businesses can charge customers for using credit cards as long as the surcharge reflects the actual payment cost. Laws introduced in 2016 ban excessive fees. For most businesses, this works out to around 1–1.5% of the transaction amount for regular cards, but it could be higher for premium ones.
New Zealand – surcharges are allowed, but businesses must follow guidelines under the Retail Payment System Act 2022. The surcharge should reflect actual costs and not be excessive. Many cafes opt for fees between 1–2%, which align with typical card processing rates.
USA – the situation is more complex. While federal law permits credit card surcharges of up to 4%, state laws can vary. Most states allow surcharges, but some, like California and New York, have restrictions or outright bans. Additionally, card networks like Visa cap surcharges at 3%. It’s essential to check your local regulations.
How Surcharges Can Save You Thousands
Let’s look at an example of a small cafe in Australia, with annual sales of $500,000, and 70% paid by credit card. If the cafe absorbs a 1.5% processing fee, it costs $5,250 each year. Introducing a surcharge shifts the cost to customers, saving the cafe the entire amount. That money ($100 per week) can go towards staff wages, new equipment, or improving profit margins.
Another example from New Zealand: a restaurant with $400,000 in card sales introduces a 2% surcharge. Customers pay $8,000 in fees that would otherwise come out of the restaurant’s profits. This adds only a few cents or dollars per transaction for most diners, which is widely accepted as fair.
Will There Be a Customer Backlash?
It’s natural to worry about how customers will react. The good news? Negative feedback is rare when surcharges are communicated clearly. Customers are used to seeing surcharges from airlines, taxis, and even utility companies, so it’s not seen as unusual.
Here are a few ways to ease concerns:
Be Transparent – display the surcharge policy where customers can see it before they pay, such as on menus or near the register. A simple note like, ‘A small surcharge applies to credit card payments to cover processing fees,’ works well. Make sure your staff understand the policy and the reasons behind it – they may be the ones who have to give an explanation.
Stay Positive – if a customer questions the surcharge, explain calmly: ‘Credit card companies charge us for processing payments, and this small fee helps us cover those costs. There’s no surcharge if you pay with cash.’
Learn from Other Businesses – many service providers have used surcharges for years without issue. Customers usually understand when the explanation is honest and straightforward.
Your Competitors Will Follow You – if you’re the first to surcharge in your area, it’s likely that other cafes and restaurants will soon follow. They have the same cost pressures, and everyone is watching what others do – be proud that you’ve taken the lead!
Introducing Surcharges: Practical Tips
Be Clear With the Wording: Use simple phrases on menus, receipts, and signs. For example, ‘A 1.5% surcharge applies to credit card payments. Thank you for your understanding.’ If you’re charging a credit card surcharge plus a weekend or public holiday surcharge, you may like to say, ‘A 10% surcharge applies on weekends and public holidays to cover higher wages required by law. A 1.5% surcharge applies to credit card payments to cover processing fees. Thank you for your understanding.’
Stick to Legal Limits: In regions like Australia and New Zealand, keep the surcharge within actual processing costs. In the USA, follow state rules carefully. Credit card processors, such as Tyro, will calculate the rate for you on the payment machine.
Offer Alternatives: Let customers know they are welcome to pay by cash or EFTPOS (debit cards) without a surcharge.
I have officially flicked the switch on my till and from tomorrow am passing on the credit card surcharge!! Saving of $9,400 per year. Krystal H.
Just to let my fellow NZ owners know that we took the leap and have started to charge 1.5% on credit card usage and also a 15% surcharge on public holidays and nobody died or have thrown their toys out of the cot . People have generally been supportive and understanding. By doing this we will claim back over $30,000 for the year in bank fees! Kylie M.
In over 12 months it’s been brought up three times, and one of those patrons now only pays cash, so I truly believe people just don’t care. Bianca F.
We held off for years because we thought we’d get backlash but we’ve barely had a comment. Joseph A.
Cultural Differences to Keep in Mind
In Australia, surcharges are widely accepted as part of everyday life. Diners often encounter them when booking flights, buying tickets, or using taxis. However, there are some regional areas where they are not widely used.
In New Zealand, the culture is similar, though smaller towns may see more resistance than urban areas. Clear communication helps bridge this gap.
In the USA, where rules differ by state, some customers may be more sensitive to additional charges. A good practice is offering at least one fee-free payment option, like cash or debit cards, to accommodate preferences.
Credit card surcharges are a simple way for small cafes and restaurants to offset rising costs and protect profits. With careful implementation and clear communication, surcharges won’t drive customers away. As more industries adopt them, they’re becoming accepted in many daily transactions.
Don’t let fear hold you back from taking a step that could save your business thousands of dollars each year.
Running a small cafe or restaurant means watching every dollar, and credit card processing fees can soon add up. Many businesses are hesitant to introduce a credit card surcharge for fear of a customer backlash. In fact surcharges are becoming common across many industries, and when implemented, they can save a small business thousands each year without upsetting customers.
The Legal Basics on Surcharging in Australia, New Zealand, and USA
Australia – businesses can charge customers for using credit cards as long as the surcharge reflects the actual payment cost. Laws introduced in 2016 ban excessive fees. For most businesses, this works out to around 1–1.5% of the transaction amount for regular cards, but it could be higher for premium ones.
New Zealand – surcharges are allowed, but businesses must follow guidelines under the Retail Payment System Act 2022. The surcharge should reflect actual costs and not be excessive. Many cafes opt for fees between 1–2%, which align with typical card processing rates.
USA – the situation is more complex. While federal law permits credit card surcharges of up to 4%, state laws can vary. Most states allow surcharges, but some, like California and New York, have restrictions or outright bans. Additionally, card networks like Visa cap surcharges at 3%. It’s essential to check your local regulations.
How Surcharges Can Save You Thousands
Let’s look at an example of a small cafe in Australia, with annual sales of $500,000, and 70% paid by credit card. If the cafe absorbs a 1.5% processing fee, it costs $5,250 each year. Introducing a surcharge shifts the cost to customers, saving the cafe the entire amount. That money ($100 per week) can go towards staff wages, new equipment, or improving profit margins.
Another example from New Zealand: a restaurant with $400,000 in card sales introduces a 2% surcharge. Customers pay $8,000 in fees that would otherwise come out of the restaurant’s profits. This adds only a few cents or dollars per transaction for most diners, which is widely accepted as fair.
Will There Be a Customer Backlash?
It’s natural to worry about how customers will react. The good news? Negative feedback is rare when surcharges are communicated clearly. Customers are used to seeing surcharges from airlines, taxis, and even utility companies, so it’s not seen as unusual.
Here are a few ways to ease concerns:
Be Transparent – display the surcharge policy where customers can see it before they pay, such as on menus or near the register. A simple note like, ‘A small surcharge applies to credit card payments to cover processing fees,’ works well. Make sure your staff understand the policy and the reasons behind it – they may be the ones who have to give an explanation.
Stay Positive – if a customer questions the surcharge, explain calmly: ‘Credit card companies charge us for processing payments, and this small fee helps us cover those costs. There’s no surcharge if you pay with cash.’
Learn from Other Businesses – many service providers have used surcharges for years without issue. Customers usually understand when the explanation is honest and straightforward.
Your Competitors Will Follow You – if you’re the first to surcharge in your area, it’s likely that other cafes and restaurants will soon follow. They have the same cost pressures, and everyone is watching what others do – be proud that you’ve taken the lead!
Introducing Surcharges: Practical Tips
Be Clear With the Wording: Use simple phrases on menus, receipts, and signs. For example, ‘A 1.5% surcharge applies to credit card payments. Thank you for your understanding.’ If you’re charging a credit card surcharge plus a weekend or public holiday surcharge, you may like to say, ‘A 10% surcharge applies on weekends and public holidays to cover higher wages required by law. A 1.5% surcharge applies to credit card payments to cover processing fees. Thank you for your understanding.’
Stick to Legal Limits: In regions like Australia and New Zealand, keep the surcharge within actual processing costs. In the USA, follow state rules carefully. Credit card processors, such as Tyro, will calculate the rate for you on the payment machine.
Offer Alternatives: Let customers know they are welcome to pay by cash or EFTPOS (debit cards) without a surcharge.
See also: How to Make Restaurant Public Holidays Profitable
Cultural Differences to Keep in Mind
In Australia, surcharges are widely accepted as part of everyday life. Diners often encounter them when booking flights, buying tickets, or using taxis. However, there are some regional areas where they are not widely used.
In New Zealand, the culture is similar, though smaller towns may see more resistance than urban areas. Clear communication helps bridge this gap.
In the USA, where rules differ by state, some customers may be more sensitive to additional charges. A good practice is offering at least one fee-free payment option, like cash or debit cards, to accommodate preferences.
Credit card surcharges are a simple way for small cafes and restaurants to offset rising costs and protect profits. With careful implementation and clear communication, surcharges won’t drive customers away. As more industries adopt them, they’re becoming accepted in many daily transactions.
Don’t let fear hold you back from taking a step that could save your business thousands of dollars each year.
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