Understanding Surcharging

In the automotive industry, surcharging has emerged as a critical strategy for managing the high costs of credit card processing fees. Surcharging allows dealerships to pass these fees onto their customers, significantly reducing their operating expenses. This practice can save dealerships tens of thousands of dollars each month by eliminating 100% of their credit card processing costs.

Consumer Perception and Transparency

While the concept of surcharging is straightforward, understanding its impact on customers is essential. Transparency is key. Dealerships must ensure that customers are fully aware of the surcharge, why it exists, and how it benefits the dealership. This transparency helps maintain customer trust and minimizes negative feedback.

Regulatory Considerations

Legal Requirements

Dealerships must adhere to various state and federal regulations when implementing surcharging. Key considerations include:

• Applying surcharges consistently on credit card payments across all methods.
• Ensuring that surcharges do not exceed the cost of processing.
• Displaying compliant signage at terminals, online payment pages, and entrances.
• Complying with all card brand and state regulations.
• Ensuring that debit cards are NOT surcharged under any circumstances.

State-Specific Regulations

Surcharging laws can vary significantly by state. California and New York have both recently passed into law state specific requirements that dealerships must follow. It's essential to partner with a provider that stays updated on these regulations and ensures compliance.

Choosing the Right Surcharging Partner

Selecting the right surcharging partner is vital for a seamless and compliant implementation. An ideal partner should:

• Automate the implementation of surcharging, ensuring compliance with all card brand and state requirements. This integration simplifies the process and reduces the burden on dealership staff.
• Provide a compliant surcharge solution across all payment methods, including retail, online, and manual payments.
• Integrate seamlessly with existing automotive solutions like Dealer Management Systems (DMS).
• Offer modern payment solutions, including ApplePay, GooglePay, Buy Now Pay Later (BNPL) options through reputable providers, and fraud liability shift through secure methods.
• Provide comprehensive training for staff on surcharging, payments, and back-office reconciliation.
• Communicate surcharging policies clearly to customers through transparent and consistent messaging.
• Offer the ability to monitor the effectiveness of their surcharging policies by tracking processing fees and surcharge savings to the individual invoice matching the DMS. This should include detailed reporting by department and user/cashier to ensure compliance and financial accuracy.

By implementing surcharging, dealerships can eliminate 100% of their credit card fees, which can result in savings of 70-80% on their total merchant processing bill each month. Dealerships activated with a comprehensive surcharging solution overwhelmingly see these immediate benefits.

Customer Impact and Experience

While surcharging can initially concern some customers, myKaarma data shows that a transparent approach has resulted in less than 5% of dealerships disabling surcharging due to negative feedback. Consistent communication and visible transparency help minimize customer dissatisfaction.

Balancing cost savings with customer satisfaction requires consistent visibility of surcharges across all customer touchpoints, including terminals, signage, receipts, and online payments. This transparency is essential for maintaining a positive customer experience.

Long-term Strategy

The payment processing landscape is continually evolving, with new laws and card brand requirements emerging regularly. Dealerships must partner with a provider that can adapt to these changes and implement them seamlessly.

Surcharging offers significant financial benefits for automotive dealerships, but it requires careful implementation and transparent communication. By choosing the right partner and adhering to best practices, dealerships can enhance their bottom line while maintaining positive customer relationships.

*This article was first published on AutoSuccess.