Surcharging: The critical payment feature that helps ISVs stay competitive

Managing the intricacies of payment acceptance costs is a critical aspect of financial health for every merchant. As businesses navigate a competitive landscape, having access to tools that directly impact their bottom line is more important than ever.

In this ever-evolving landscape, Independent Software Vendors (ISVs) must look beyond basic payment processing and actively integrate strategic, cost-effective solutions. One feature that directly supports their merchants' profitability and operational control is surcharging.

What is surcharging?

Simply put, surcharging is a practice where merchants add a fee to a customer's bill when they choose to pay with a credit card. This fee, typically a percentage of the transaction value, is designed to help merchants cover the processing costs associated with accepting credit card payments, such as interchange fees charged by card networks.

It is crucial to understand that surcharging applies exclusively to credit card transactions. It cannot be applied to other payment methods. This specifically means that all types of debit cards are ineligible for surcharging—this includes debit cards requiring a PIN, as well as debit cards processed without a PIN (often called 'check cards' or those tied directly to a checking/savings account). Similarly, ACH transfers and cash payments cannot be surcharged.

The ability to implement surcharging is also governed by specific card brand rules and local regulations regarding its application and maximum allowable amounts, and it is the merchant's responsibility to understand and adhere to the rules that apply to their business and location.

Why surcharging integration is crucial for modern ISV platforms

For ISVs committed to delivering top-tier payment solutions, adding surcharging to their payment product is crucial, as it addresses fundamental merchant needs.

Here are a few benefits of surcharging integration:

1. Direct merchant cost reduction

Surcharging provides a straightforward mechanism for merchants to offset the fees associated with accepting credit card payments. By applying a pre-configured fee (based on regulations) to credit card transactions, merchants may be able to recover these costs, directly impacting their profitability, particularly for businesses with substantial credit card volume. By offering this option, ISVs empower their merchants with greater control over their payment processing expenditures.

2. Simplified and automated operations

Merchants expect their tools to be efficient. Integrating surcharging through a solid payment platform, like DPP (Deluxe Payment Platform), brings valuable automation. Once set up, the system automatically calculates and applies the configured surcharge. This cuts out manual work and potential errors, a level of ease that merchants look for. Clear information on receipts and reports also ensures transparency and makes merchant bookkeeping simpler.

3. Tools for compliance

The regulatory environment for surcharging is complex, with specific rules regarding maximum allowable percentages and varying state laws. ISVs can provide significant value by offering surcharging through providers that have tools designed to help navigate these complexities. These platforms are built with settings that can be configured to align with certain card brand rules and state-level regulations, and typically, merchants cannot alter these critical settings themselves. This automated approach can assist merchants with their compliance efforts, (though the legal responsibility for business practices ultimately remains with the merchant). The ability to offer a platform with strong compliance-support features is a critical differentiator.

4. Enhanced merchant retention and platform value

Offering features that save merchants money, simplify their work, and and support their compliance efforts helps build strong merchant loyalty. In today's competitive ISV market, platforms that don't offer such key tools can fall behind. Surcharging, especially when easy to add through API integrations like those from DPP, makes an ISV's platform more essential, turning it into a vital partner for merchants.

Surcharging: A key offering for ISV growth

For ISVs, adding a surcharging solution with strong compliance-support tools: it's a key step in offering a payment solution that truly meets core merchant needs and keeps the platform competitive. This is about giving merchants powerful tools they will increasingly rely on.

As surcharging becomes a standard feature in merchant services, ISVs must incorporate easy-to-use solutions that help merchants manage their payment options responsibly. This will not only meet what the market expects but also show leadership in providing full support to merchants. Overlooking this important component means missing a clear opportunity to empower merchants and strengthen the ISV's position in the market.

This information is not intended as legal advice. Surcharging laws and regulations vary by state and may change over time. Merchants should consult with their own legal counsel to determine if, when, and how these surcharging laws may apply.