Report: The Impact of Merchant Surcharges on Cardholder Satisfaction

The stresses of the pandemic have stretched merchants and consumers to their limits. In addition, as inflation has spread throughout the economy, credit card processing fees are adding to merchants’ financial burdens. Some have decided to recoup the added costs with card surcharges, but how do consumers react when faced with surcharges? PYMNTS’ research finds that the U.S. cardholders who have never had to pay a surcharge typically raised objections when asked to consider the prospect of paying one. The cardholders who have paid them were often more accepting of the extra fee.

These are among the key findings in Credit Card Surcharges: How Cardholders React To Extra Costs, a PYMNTS and Payroc collaboration, examining and analyzing credit card users’ behaviors and reactions to merchant-imposed credit card surcharges. We surveyed 2,507 U.S. credit card holders from Dec. 8, 2021, to Dec. 22, 2021, about how they view surcharges and their actions in response to being asked for the extra fees. We asked cardholders if surcharges hurt their opinions of retailers who impose the fees or motivated them to either take their business elsewhere or use another form of payment to avoid the extra cost.

Some additional key findings include:

• Eighty-five percent of credit card holders asked to pay a surcharge for a transaction will pay it. PYMNTS’ data found that surcharge request and acceptance rates were consistent across local and national or regional restaurants and retail stores, although some slight trends emerged. Locally owned restaurants and stores impose surcharges more frequently than national and regional restaurant and retail chains, yet national and regional locations have slightly higher surcharge acceptance rates from cardholders than their local counterparts.

• Fifty-eight percent of credit card users who have never been asked to pay a surcharge say they would not pay it if a merchant tried to charge one. This indicates the high level of resistance to surcharges among cardholders who have not had to face paying them. At the same time, PYMNTS’ research reveals that cardholders who have faced surcharges are far less negative about them than credit card users who consider them just hypothetically.

• Seventy-one percent of cardholders who use alternative payment methods to avoid surcharges opt for cash. Cardholders have a lot of experience using a wide variety of payment methods, and they will rely upon virtually any of the ones available to them if they are trying to avoid paying a credit card surcharge. Forty percent of credit card holders used debit cards as an alternative, 22% used PayPal and 19% used digital wallets.

The pandemic’s economic fallout made surcharges more attractive for business owners, especially those representing local restaurants and retailers. When asked about surcharges as a hypothetical issue, cardholders typically resist the prospect of paying them for the first time. However, our data regularly finds that the reality of paying the fees is less bleak.

Consumers will more likely pay the surcharge than refuse to pay it when the time comes. Merchants that tap solutions that offer increased control of surcharges and fees may be able to best communicate surcharges’ impacts and thread the needle, minimizing the harm to cardholding regulars while buffering their bottom lines during a challenging time.

To learn more about how merchants can adopt credit card surcharges and still sustain a high level of customer satisfaction, download the report.