Surcharging is becoming an essential practice for automotive dealerships looking to reduce costs and increase profitability. By passing the cost of credit card processing fees onto the customer, dealerships can eliminate significant expenses that affect their bottom line. In this blog, we’ll explore the concept of surcharging, its benefits for automotive dealerships, and why it is crucial for the industry.
Surcharging is the practice of adding a fee to a customer’s credit card transaction to cover the cost of processing the payment. For automotive dealerships, this means that instead of absorbing the fees associated with credit card transactions, the customer pays a small additional amount. This practice immediately eliminates tens of thousands of dollars in processing costs from dealership bottom lines each month.
Surcharge allows for dealerships to pass the cost of credit card processing fees to the customer, effectively eliminating 100% of the cost of credit card processing costs. This can lead to substantial savings, as credit card processing fees typically account for a significant portion of a dealership’s monthly expenses.
The primary benefit of surcharging is financial. By implementing a surcharging strategy, dealerships can save up to 70-80% on their total merchant processing bill each month. This saving is achieved by transferring the burden of credit card fees from the dealership to the customer.
Dealers benefit from merchant processing savings immediately from the day of activation. This immediate impact on the bottom line can significantly improve a dealership’s profitability and financial health.
While the financial benefits of surcharging are clear, dealerships must also navigate a complex regulatory landscape. Surcharging is subject to various state and federal regulations, as well as card brand rules. It is crucial for dealerships to implement surcharging in a compliant manner to avoid legal risks.
Dealerships must apply surcharges consistently across all payment methods, including physical card terminals and online payments. They must also ensure that the surcharge does not exceed the cost of processing and that compliant signage is posted at terminals, online payment windows, and building entrances.
myKaarma’s surcharging solution helps dealerships stay compliant by automatically handling these requirements, ensuring that dealerships do not have to worry about the legal complexities.
Transparency is key to the successful implementation of surcharging. Customers need to be fully aware of the surcharges applied to their transactions. This transparency helps build trust and minimizes potential negative feedback.
myKaarma’s integrated solution allows for a painless transition off of surcharging with zero downtime, making it an easy change if the dealership decides to change course. This flexibility ensures that dealerships can adapt to customer feedback and maintain a positive customer experience.
The success of surcharging is evident in the numerous case studies from dealerships that have implemented this strategy. According to myKaarma data, out of over 100 dealerships activated on surcharge, less than 1% have disabled it due to negative customer feedback. This indicates that with the right approach, surcharging can be a seamless addition to a dealership’s operations without significantly impacting customer satisfaction.
Surcharging offers automotive dealerships a powerful tool to eliminate credit card processing fees and improve their financial health. By understanding the benefits and ensuring compliance and transparency, dealerships can successfully implement surcharging and see immediate financial gains. With the support of partners like myKaarma, dealerships can navigate the complexities of surcharging and enjoy its many advantages.