BY MARCI GAGNON
Surcharges : Passing Real Costs to Customers
Should Energy Marketers start passing on payment acceptance costs to customers to help to maintain margins ? We receive this question multiple times a week and our answer is always a solid … “ Maybe ...?”
This year the industry saw increases for payment acceptance , which was not a surprise because just like everyone else the card brands took a hit with the Covid pandemic . The impact on the industry was more dramatic as the 2020 and 2021 price increases hit Energy Marketers at the same time this past Spring , creating sticker shock .
Visa delivered the most dramatic price increase and because they are the most widely utilized card type it ’ s likely to impact your bottom line . High level : Visa completely removed the “ Emerging Market ” category and created a “ Services ” category that has different pricing based on card type ( for instance rewards cards , etc .) and sales amount making the new program confusing for Energy Marketers . Visa also increased the cost of business card transactions not configured to pass the necessary data to the card brands required to qualify these transactions at the lowest eligible rate . Translation : the gap between qualified and downgraded business card transactions has grown .
Even when Energy Marketers are set up properly to accept business cards , there are some fees that some payment processors add as interchange correction . These fees add anywhere from 25-50 cents on every $ 100 as a separate line item . It ’ s disingenuous to set companies up to properly pass business cards and then charge them for it , which in some cases is more expensive , but it ’ s happening as processors look to make up margin . Which brings up the topic of surcharging . Surcharging is when a business offsets some of the payment acceptance costs by passing along a fee to the customer .
Over the past few years , we had some favorable legislation regarding surcharges and I think there are some pros and cons . If you are in a highly competitive area you may want to think twice before implementing a surcharge as it could inadvertently push folks to go to a competitor . However , if you are in an area where there is limited competition it ' s definitely a good option . There are still some states that do not allow surcharges : Colorado , Connecticut , Kansas , Maine and Massachusetts . First , then , make sure your state allows them .
The next step to offering a surcharge is to make sure your back-end software can accommodate the additional fee within the software ’ s reporting . We are in a highly regulated industry for
weights and measures and most software is reconciled on gallons delivered . Say you deliver 100 gallons and the fee is $ 250 . If you add a 2 % surcharge that is an extra $ 5 fee charged to the customer and the total transaction would now be $ 255 . If the software cannot accommodate reporting for the extra $ 5 , it could wreak havoc on your general ledger by reporting that 102 gallons were delivered instead of accommodating the extra fee as a surcharge .
Once you check in with your back-end software and portal companies to confirm they can accommodate a surcharge , the next step is to check in with your payment partner . Ask them to review the legalities in your state as well as run a line-by-line card audit which will identify which card types are eligible for a surcharge . Not all of them are . You may find that you have a healthy mix of debit cards that don ’ t qualify and the savings may not be worth the cost of registration or any software changes necessary to implement a surcharge program .
Finally , the intent of the program is to make your business whole on the payment acceptance costs , but not in a position to make money off of charging your customers a fee . Considering that Mastercard and Discover have a flat rate program , your payment partner will need to make sure they accommodate for the variance in fees to ensure that your company is in compliance .
We are seeing more companies begin to implement surcharge programs , but there are a lot of things to consider : your customer base , technology partners and state legislation , to name a few . We do think that the industry is trending toward surcharge programs , and that within five years it will be commonplace . Currently , most customers see credit card acceptance as the cost of doing business . The best thing you can do to save on payment acceptance costs is to make sure you are set up properly with the card brands as an Energy Marketer as well as set up to process business cards at the best rate .
If your company is interested in a surcharge program , reach out to your software and payment partners and they can help you assess whether it is right for your business . l FON
Marci Gagnon is vice president of strategic alliances for Qualpay and has been in the payments industry for over 15 years with a concentration on recurring billing and the energy space . Qualpay provides processing solutions to fuel delivery and service businesses . For additional information contact Marci Gagnon at marci @ qualpay . com or visit https :// www . qualpay . com / industry / utility-and-energy .
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