by Matt Rej
With rising merchant fees, many businesses have turned to surcharge programs to offset costs. The concept seems simple, and modern POS systems have made this almost too easy (mostly because it benefits the processor).
But this is far from a slam-dunk decision. And the most recent data in 2026 shows that the “small” 2-3% surcharge you’re passing to customers paying with a credit card is actually costing you business:
- 32% of merchants report that customers have walked away from a purchase when surcharges were applied.
- 42% of consumers say they have stopped buying from specific businesses that charge junk fees.
- 81% of cardholders have used another payment method to avoid surcharge fees.
- Customer satisfaction scores drop by 39 points when a surcharge fee is applied to credit card transactions.
So if you’re on the fence about surcharging your customers or you’re currently imposing surcharge fees and thinking twice about it, this guide is for you.
We’ll see if the perceived benefits actually outweigh the costs, and I’ll share some other ways to reduce your processing fees without passing the buck to your customers.
The Core Problem With Surcharging
Let’s put the data and lost customers aside for a minute and talk about the fundamental problem with surcharging.
Here’s the reality of what’s happening: Merchant fees are eating into your margins, so you’re looking for a solution. But passing the costs to your customers doesn’t address the root cause, and it ends up giving you more problems than it solves.
The issue is that your merchant processing fees are high, and getting higher. Surcharging doesn’t change that.
- Your processing fees are still high and climbing, regardless of whether you surcharge.
- Instead of negotiating better terms, you’re just shifting who pays.
- The underlying cost structure remains completely untouched.
- And if rates keep rising (which they will), your surcharge percentage has to keep rising with it.
This is not a solution for dealing with high merchant fees. It’s just a workaround that comes with its own set of costs that are far bigger than most businesses realize.
Surcharges Benefit Processors, Not You
Why do you think so many processors are starting to advertise surcharge programs? It’s more money for them.
When you surcharge your customers, your processor is still charging you their full markup on every transaction. Now there’s a surcharge sitting on top of that, and they’re taking a percentage of that surcharge too.
- Payment processors take a cut of every transaction you process.
- The higher the transaction amount, the more money they make.
- A surcharge just means you’re paying them extra money to keep your rates high.
That 3% surcharge you’re passing to your customers doesn’t actually offset your costs. It just roughly covers them while simultaneously increasing your total effective rate.
This creates a dangerous long-term risk for your business because it removes the natural pushback that forces processors to keep rates competitive.
If you’re not the one paying, why should you care if rates creep up another 25 basis points? Or if another bogus fee is assessed on your total volume? Or if your annual fee triples from one year to the next?
Processors know that you’re less likely to care about this stuff. So it gives them the green light to keep increasing rates, which is the very problem you’re attempting to solve by surcharging.
We’re already reaching a tipping point where the processing fees are exceeding what businesses are allowed to surcharge.
How Customers Feel About Surcharge Fees
Surcharge fees aren’t new at this point. Customers have been encountering them for years, and their sentiment has never been positive.
But there’s been a meaningful shift in behavior. It’s no longer just a frown at checkout. Customers are abandoning purchases and deliberately avoiding businesses that surcharge.
The newest 2026 data from JD Power that I cited earlier tells the full story:
- Customers are walking away mid-transaction when a surcharge appears.
- They’re using other payment methods to avoid fees, adding friction to the checkout.
- Satisfaction scores are plummeting, and they’re not coming back.
- In some cases, they’re actively warning others to avoid businesses with surcharges.
A whopping 87% of consumers say they feel “nickel-and-dimed” when they’re asked to pay a surcharge fee on credit card transactions. An additional 60% say it’s “unfair” for businesses to pass merchant fees to their customers.
Think about how hard you worked to get customers in the door. Is this how you want them to feel when they leave? That’s what’s happening when you add a surcharge fee.
Surcharges are considered a “junk fee” in the eyes of consumers, and it carries serious weight with their spending behavior.
Junk fees have crept into every corner of the economy. From airlines to hotel resort fees and service fees on event tickets that nearly exceed the base ticket price, customers are fed up. And your surcharge fee puts your business in that same category, whether you intended it or not.
So, is Surcharging Worth it?
Let’s do some quick napkin math. Nothing completed, just the basics to get a rough idea to figure out if surcharging is worth it.
Your surcharge program is designed to cover roughly 2-3% of your processing costs. But the data shows you’re realistically looking at losing around a third of your customers in the process.
In practice, this means:
- You’re getting an extra $3 for every $100 in credit card sales.
- But in the process, you’re losing $300,000 in sales on every $1 million in normal volume.
- That 3% gain doesn’t come close to offsetting a 30% drop in customers.
Even if you’re not losing a third of your customers (yet), the 3% surcharge is such a slim gain that it really doesn’t justify any loss in sales.
There’s no amount of recovered processing fees that makes this math work. You’re essentially trading long-term customer relationships for a marginal gain in overhead reduction.
And unlike surcharge fees, lost customers won’t show up cleanly on a statement. Most businesses don’t end up realizing the damage they’ve done until a year or two after their surcharge program went live.
They can’t figure out why they’re losing business when the reason is that they pushed those people away.
What to do Instead
One thing I never understood about credit surcharge fees is why it’s the only expense category that’s “acceptable” to pass to customers. If your rent goes up, electricity bill spikes, or cost materials rise (which they all do), you don’t add separate line items to your invoices.
You either raise your prices, cut costs elsewhere, or negotiate better terms with your suppliers.
If raising your prices is off the table, that’s fine. You can still slash your cost of merchant fees without changing providers or surcharging your customers.
- A significant percentage of your total merchant fees are negotiable.
- If merchant fees are cutting into your margins, it’s a sign your processor is overcharging you.
- Overages can come in the form of inflated rates, bogus fees, and deceptive pricing designed to hide their markups.
- All of this stuff can be identified, removed from your bill moving forward, and potentially credited back to your account.
Surcharging does not address high processing fees.
If a contractor gave you a bill with charges you didn’t recognize or agree to, you wouldn’t just pay it. You’d ask questions and push back. That’s the same approach you need to take here.
Push back against the reason your merchant fees are so high by going straight to your processor. Don’t let them off the hook while ruining relationships with your customers.