How to navigate credit card fees in direct sales

3 min read

As a food and beverage processor involved in direct sales, what’s the best strategy for handling credit cards?

Discussing credit card transaction fees can be uncomfortable. Understanding contracts, point-of-sale equipment and benefits of different service providers is complex. Add to that a change in rules in late 2022 allowing businesses (except those in Quebec) to pass transaction fees to customers to a maximum of 2.4% per purchase.

As a food and beverage business involved in direct sales, what’s the best strategy for handling credit cards? Should you pass fees on to your customers? Build the fees into the prices? Absorb the fees as a cost of business? Get rid of credit cards completely? There’s a lot to consider.

Necessary evil

Corinne Pohlmann is senior vice president of national affairs with the Canadian Federation of Independent Business. She says some small businesses may be tempted to get rid of credit cards altogether, but the explosion of online shopping that began in the early 2020s has made that impossible. To stay afloat, businesses had to take remote and touchless payments, which meant credit cards.

“In order to satisfy all your customers, it’s important,” she says. “The vast majority [of businesses] do accept credit cards in some form.”

Despite the court ruling in late 2022 allowing fees to be downloaded to customers, businesses still need to set up their accounts to do this, Pohlmann notes.

Rebekah Crowley, co-owner of Roots and Wings Distillery in Langley, B.C., accepts credit cards for payments and, begrudgingly, the accompanying fees. She calls the fees “a necessary evil” and hesitates to apply them to customer purchases. Instead, she expects to continue to roll fees into product pricing.

Do your homework

Whether you decide to pass the fees along or keep them as a cost of doing business, it’s important to understand the services credit card companies provide. Choosing the right one requires a fair amount of homework.

For example, Crowley uses Square, which has a tiered contract. Debit cards are cheaper than credit cards; tapping a credit card has higher fees than password entry; inputting a credit card manually has among the highest fees. This style of tiering is common among acquirers.

Here are five points to keep in mind when looking for the best credit card company for your business:

Variability: Fees vary widely based on the number of transactions, the type of cards your customers use and the acquirer’s fee structure.
Uniqueness: Each acquirer has its own set of fee structures and calculations. Some, for example, offer special, limited-time introductory rates. Know how long these special offers last and how charges will change afterwards.
All-in: Consider paying a flat rate that covers all transactions. It will likely be the highest rate, but it remains the same each month, regardless of fluctuating transaction levels or types of customer cards, so it will be easier to budget.
Use your experts: Review the acquirer contract with your lawyer or accountant to ensure you clearly understand all terms and conditions.
Ask around: Talk to neighbouring businesses, peers and others in your community to find out which credit card company they deal with and their level of satisfaction.

If you do decide to pass along some fees to your customers, consider these points first:

Check if competitors charge the fee. How is their plan to handle credit card fees a detriment or benefit to you?
Talk to your credit card company to ensure their system can manage passing along the fee to your customers and inform them of your desire to change.
Let customers know about the fees and why they are in place using emails, signs at the entry and signs at the cash register.
Train staff on how to explain the fee and manage any dissatisfaction.

Article by: Ronda Payne

Marketing & Sales