Nearly a third of small businesses that assess credit card surcharges say that customers cancel purchases when they see the extra fee at checkout, according to J.D. Power survey released last week.
The data and analytics firm queried roughly 4,400 U.S. small businesses and found 35% include surcharges for customers who use credit cards, up slightly from 34% in the same survey last year. Of the small businesses that assess those charges, 32% said customers cancel a purchase when a surcharge is included in their bill at least some of the time.
The survey was conducted from August through October and the results were released on Jan. 13.
“For merchants, the approach is not without risk,” said John Cabell, managing director of payments intelligence for J.D. Power. “Building your cost of doing business into your pricing is something that businesses have been doing for a long time. Businesses are more comfortable tacking on fees because consumers seem to be okay with paying them in most cases, but as it increases it may become more fatiguing and may create gaps in customer loyalty.”
The survey had its limitations, noted Richard Crone, CEO and founder of Crone Consulting.
“What the study doesn't measure and what the merchants didn't calculate or display here is what was the net return on investment from surcharging?” he said.
Crone also noted that a proposed settlement reached in November between the U.S. card network giants, Visa and Mastercard, and merchants would allow businesses to more easily assess higher surcharges for expensive cards that consumers are incentivized to use through cash back and perks.
Surcharges on specific cards might be more profitable than blanket surcharges, he said.
Politicians and merchants are making efforts to limit swipe fees. Those fees typically amount to between 2% and 4% of a transaction.
U.S. senators last week reintroduced the Credit Card Competition Act, a bill designed to lower costs through increased credit card competition by requiring banks that issue credit cards to make networks other than Visa and Mastercard available to merchants.
