A young female counter service restaurant owner looks over her finances and tries to determine how to handle processing fees.

It’s expensive to run a business and with inflation, gas prices and rates increasing, more small business owners are looking for ways to save money and offset credit card processing fees. 

You may have heard some merchant service companies advertise “free” credit card processing or “no fee” credit card processing. These offers can be tempting to any business owner trying to stay profitable amid rising costs but what do they actually mean? There’s no such thing as free lunch, so who’s eating the processing fees?

Here’s what you need to know about free credit card processing and tips on how to offset credit card processing fees. 

What is “no fee” credit card processing?

“No fee” credit card processing, free credit card processing, zero cost credit card processing – no matter what you or the merchant services provider call it, these terms describe the practice of passing total or partial credit card processing fees onto customers.

Example: Instead of Hometown Coffee Shop paying for credit card processing on every mocha latte purchased with a credit card, the Shop implements a charge so that the customer is paying or covering that fee – not Hometown Coffee Shop. 

How does “no fee” credit card processing work? 

There are a few ways that business and merchant service providers work together to pass the buck onto the customer, which includes adding a surcharge, a convenience fee or offering a cash payment discount. Note that many of these methods require close attention to state-level regulations and rules imposed by individual credit card companies.

At the end of the day, when it comes to “no fee” credit card processing, someone is paying the fee – it’s just a matter of whether it’s the business or the customer.

Benefits of “no fee” credit card processing

The main benefit as the business owner is that those fees aren’t coming out of your register so you’ll save between 1.5%-3.5% on every credit card transaction.

Risks of “no fee” credit card processing

The biggest downside is that some of your customers won’t be thrilled about paying extra for the convenience of using a credit card, which could result in some lost business. Additionally, the rules and regulations around surcharges and convenience fees can be difficult to navigate: laws vary from state to state and each credit card company has different rules and requirements.  

How to offset credit card processing fees

Credit card processing fees are part of doing business, but that doesn’t mean that there aren’t ways to reduce the burden. Here are 4 ways to offset credit card processing fees. 

Start a cash discount program

This is a very popular option because it’s fairly easy to implement with the right restaurant POS and is legal across the United States. A cash discount program incentivizes customers to pay in cash by offering a discount that’s inline with average credit card processing fees. 

For example, many business owners with a cash discount program will offer a 3.5% discount to anyone who pays with cash, since credit card processing fees typically top out around that amount.

PRO: More cash paying customers mean that you’re paying fewer credit card processing fees. 

CON: Customers without cash may choose a different restaurant or food truck instead of paying “extra” for using a credit card. 

Build credit card processing fees into menu pricing

Another method to offset your credit card processing fees is to factor those fees into your menu pricing. For example, you typically sell your burger and fries combo for $8.25. Add to that the 3.5% processing fee and you raise your prices by $0.30 for a grand total of $8.55. You’re still responsible for the processing fee, but you’ve made enough on your sale to cover that cost. 

PRO: Your sales will more than cover each credit card processing fee so you won’t be losing money on each transaction. 

CON: Overhauling your menu pricing and making menu updates can be time consuming without the right menu management system.

Shop around for lower fees

If you feel like you’re being charged an arm and a leg for credit card processing and you’re not thrilled with your current POS, it’s time to shop around. There are dozens of merchant service providers that each offer different credit card processing fees, service terms and product suites. In addition to just the pricing differences, take the time to compare the functionality of each provider’s POS, menu management systems, online ordering solutions, and customer service experience to find the best fit for your restaurant. 

PRO: Nothing feels better than working with a company that makes running your restaurant easier, more efficient, and less expensive.

CON: Switching providers can cause temporary headaches as you learn new systems. 

Charge a convenience fee 

Convenience fees are an increasingly common way to offset credit card processing fees. This strategy comes into play when a customer uses a form of payment that’s not typical for that business. 

For example, if your restaurant typically accepts various forms of payment in-person, you may be able to charge a convenience fee for online orders. Convenience fees are subject to specific rules and regulations as determined by individual credit card companies and local lawmakers so talk with your accountant or POS-provider to see if your business is eligible. 

PRO: You’re able to cover the cost of online credit card processing which is typically higher than in-person processing. 

CON: You may lose customers who aren’t willing to pay a premium for the convenience of paying ahead online. 

Tips for implementing “no fee” credit card processing

Before you make any big changes that involve a “no fee” credit card processing strategy, there are a few steps you need to take to keep your customers happy – and keep you out of legal trouble. 

**Disclaimer – This blog post is for informational purposes only and is not intended to provide legal advice, instruction or guidance. Please consult with a lawyer and/or accountant. 

Check local and state-level laws and requirements

Rules and regulations around credit card processing, surcharges, convenience fees and other ways of creating pass-through fees are created and enforced state-by-state. If you’re thinking about implementing a “no fee” credit card processing strategy, consult with a lawyer or knowledgeable accountant to understand all rules, regulations and requirements in your specific state and county. 

Notify your customers

Even if your state gives the green light on surcharges and other methods to offset credit card processing fees, you are likely required to notify your customers wherever they make their purchases, whether in-person at your restaurant or online via your website or within an online ordering module. This notification should clearly state what customers can expect on their bill whether it’s a surcharge, a convenience fee, or a cash discount. 

Prepare for customer reactions

One thing that’s guaranteed when implementing a “no fee” credit card processing strategy that affects your customer’s bill is that you’re going to have some grumpy customers. With more and more people doing away with cash and relying on credit cards for all of their purchases, be prepared to have some guests walk away from your truck, give you an earful during check out, or simply not return.  

Does Table Needs offer “no fee” credit card processing? 

At Table Needs, we understand that every penny counts and that’s why we are completely transparent with our partners and don’t lock any of our customers into expensive long-term contracts. (In fact, we don’t use contracts at all.) 

Table Needs offers the following flat-rate credit card processing fees: 

  • 2.69% + 10¢ (when the customer’s card is present at the time of transaction) 
  • 2.9% + 30¢ (when the customer’s card is not present at the time of transaction for example, online ordering or call ahead orders)

If your restaurant is interested in learning how to offset credit card processing fees, Table Needs will work with you to find the best-fit solution for your specific needs. One method is to “pass through” most of the charges to guests or split the fee with them. We will also help ensure that you are meeting all requirements and regulations from setting up this pass-through system to complying with state-level regulations to creating notices to hang near your cash register. 

Need to update your menu pricing? We can help with that too. Our knowledgeable customer success team will work with you to review and make recommendations on your menu pricing strategy AND help you update your digital menus. 

We do all this and more through our restaurant-focused POS and our commitment to helping quick-service restaurants and food trucks run profitable, efficient businesses. 

For more information about managing your restaurant, check out these resources: 

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