Are You Sure You Want to Charge Your Customers A Fee for Using Their Credit Card?

[Joe Marconi]

Many auto repair shops are adding a fee to the final invoice for customers using credit cards. I get it, but don't agree.

For me it's simple. First, do your best to negotiate the best deal from your credit card provider service.  Next, take that fee and add it to your cost of doing business.  To me, I consider this fee an expenses, just like all other expenses: office supplies, utility bill, insurance, taxes, training, travel expenses, maintenance, etc. etc. 

From your total average monthly expenses, you will be able to determine your breakeven, and from there, set your net profit goal. In other words, forget about the charging the customer a fee, just build into your overall prices. You will accomplish the same thing, and not bring attention to the customer that small fee that may be a big deal. 

[Transmission Repair]

We did exactly what you suggested, Joe.  Because our average ticket was so high, we got a smoking deal on credit card processing fees.  All, but American Express were under 1%.  AmEx processing fee was 4%, but we didn't get many AmEx cards.  I know of a few local businesses that simply don't accept AmEx cards because of their high fees.  These were the same businesses that gave a discount for cash.  My question was, "What's the difference between giving a discount for cash vs. paying a credit card fee?"  The only reasonable thing I could come up with was the sale would end up being unreported income, aka skimming cash.

Our average monthly sales were about $100K and just about everybody used plastic to pay for major transmission work.  Our average monthly processing fee was rarely under $1K.  Although we did accept cash and checks, very darned few people use those methods of payment.  As a sidenote, we didn't even have a cash box!  I actually preferred payment by plastic.

Another fee we calculated into the cost of doing business was shop supplies.  Like charging for credit card fees, customers feel a little miffed when charged for shop supplies.   To many, it's like splitting hairs.  The bottom line of our strategy was to have nothing but parts and labor on the invoice.  Everything else was simply calculated into the cost of doing business.

[Joe Marconi]

1 hour ago, Transmission Repair said:

We did exactly what you suggested, Joe.  Because our average ticket was so high, we got a smoking deal on credit card processing fees.  All, but American Express were under 1%.  AmEx processing fee was 4%, but we didn't get many AmEx cards.  I know of a few local businesses that simply don't accept AmEx cards because of their high fees.  These were the same businesses that gave a discount for cash.  My question was, "What's the difference between giving a discount for cash vs. paying a credit card fee?"  The only reasonable thing I could come up with was the sale would end up being unreported income, aka skimming cash.

Our average monthly sales were about $100K and just about everybody used plastic to pay for major transmission work.  Our average monthly processing fee was rarely under $1K.  Although we did accept cash and checks, very darned few people use those methods of payment.  As a sidenote, we didn't even have a cash box!  I actually preferred payment by plastic.

Another fee we calculated into the cost of doing business was shop supplies.  Like charging for credit card fees, customers feel a little miffed when charged for shop supplies.   To many, it's like splitting hairs.  The bottom line of our strategy was to have nothing but parts and labor on the invoice.  Everything else was simply calculated into the cost of doing business.

I am in total agreement. You know, way back in ancient times...the early 1980s, I only accepted cash and checks. As the price of repairs and services began to increase dramatically, it became unreasonable to expect customers to only pay in cash or check. We are on the same page. 

[pfseeley442]

Years ago I figured out what cards cost and added the proper amount to my labor rate. Very easy. I have a friend who owns a shop and did the cash discount or pay a fee on the credit card. His first month he had three bounced checks. I asked him how did that work out for you ? LOL    Customers just want the bottom line. All the extra fees agravate me, IE: $10 fuel charge to deliver oil. 

 

[Joe Marconi]

1 hour ago, pfseeley442 said:

Years ago I figured out what cards cost and added the proper amount to my labor rate. Very easy. I have a friend who owns a shop and did the cash discount or pay a fee on the credit card. His first month he had three bounced checks. I asked him how did that work out for you ? LOL    Customers just want the bottom line. All the extra fees agravate me, IE: $10 fuel charge to deliver oil. 

 

Makes sense, and agree. 

 

[RYAN B]

Joe. I thought the exact same way, our credit card processing fees were over 45000 a year! We charge and now we are getting more checks and cash, but I am able to not charge the fees at my discretion! I hate to say but people are getting educated on paying the fee.  It's hard, I did a cylinder head on a Jeep last week the bill was over 4000, the fees would have been over 120.00, customer was told and they wrote a check, it's getting harder to hide and eat those costs. 

[RYAN B]

Joe, In our area the dealers are now charging by the 1/2 hour and they are also charging the fees as well! most dealers around here are 180 dollars and hour!

[Joe Marconi]

15 hours ago, RYAN B said:

Joe, In our area the dealers are now charging by the 1/2 hour and they are also charging the fees as well! most dealers around here are 180 dollars and hour!

Labor dollars is becoming the main driver of profit. Years back it was parts and labor, a 50/50 split. Not so anymore. Our labor needs to be our main profit center. The problem is it's not that easy at times due to so many variable we encounter on a daily basis. 

[DUFRESNES]

I have always believed it was part of doing business.  I am questioning it now.  Other than the doctor's office, I have been charged for everything I put on a cc.  as much as 4% and as small as 3%.  I am paying over 3K a month.  Had a flooring company come out and give us a bid for flooring, yes they added a % on top or I could pay with a check.  Yes, I paid with a check.  My question is how many of your shops charging a fee. 

[RYAN B]

We have been charging for the last 3 to 4 months, but I do have the option to eat the charge. Its hard but I do explain it to the customer and I have a sign up. I don't charge shop supplies but I do charge for Oil and filter disposal and tire disposal. You have to pick and choose and the credit card fees you can validate versus  charging shop supplies. I always felt the shop supplies were a necessary charge but I always heard a lot of grief from it.

[DUFRESNES]

We have been charging shop supplies for over 25 years.  It is a necessity in my opinion.  Every dealer and dealership in our area has always charged for shop supplies.  I see now, most dealers are either charging for credit card fees or are getting ready to charge for them.   I am going to have our auto association put our a survey and see who all is charging for them.  I will let you all know .

[Gary Childs]

No way would I charge that or even a shop supplies fee. Just raise your labor rate up some to cover it is what we do. 

 

[Joe Marconi]

10 hours ago, Gary Childs said:

No way would I charge that or even a shop supplies fee. Just raise your labor rate up some to cover it is what we do. 

 

It is also important to point out that some states have regulations on how to charge for supplies. This may lead to legal issues. As you said, incorporate what you pay for supplies into your cost of doing business, and you will be fine. 

[Joe Marconi]

18 hours ago, DUFRESNES said:

We have been charging shop supplies for over 25 years.  It is a necessity in my opinion.  Every dealer and dealership in our area has always charged for shop supplies.  I see now, most dealers are either charging for credit card fees or are getting ready to charge for them.   I am going to have our auto association put our a survey and see who all is charging for them.  I will let you all know .

Also, please check the laws in your State regarding shop supplies. Thank you. 

[DUFRESNES]

I know California is different in their laws.  Yes I should have said that, check the laws of your state.

 

[DUFRESNES]

As an after thought, we have been asking our customers what their opinion would be.  So far, they have said, everybody is doing it.  I know that doesn't make it right or wrong.  Just a thought.  Our credit card bill averages $3500. a month

 

[newport5]

Joe,

I can see that for invoices above $2k or $3k, if the customer knows ahead of time.

I see how that makes sense to the business owner (and their accountant). But I’ll bet to the customer for the lower invoices, you’re trying to eek out another $10 or $15. AND, they could think, where else are you eeking out an extra few bucks (or more)? Apparently you are not profitable enough to absorb that. Why? Not enough (good) customers? Why?

It’s a convenience for them. So they’re stuck paying that or write a check or go to the bank and get $1000 in cash??? Plus many get cash back or flight miles, which you’re also taking.

Remember searching airline prices, comparing prices, making your decision, only to find out at the very end there are additional charges? Taxes, fees, and those darn baggage charges. Did you like that? I doubt it. I think credit card fees fall into that category (for the customer).

[Brian Smith]

On 10/24/2024 at 8:31 AM, Joe Marconi said:

You will accomplish the same thing, and not bring attention to the customer that small fee that may be a big deal. 

Agreed, the customer, and people in general, remember how you made them feel. If you can make them feel good about a purchase or an experience at your shop they'll likely come back, spread a good word, and be willing to pay you even more than originally planned. It pays to be a good human being, especially in the auto industry.

[TheTrustedMechanic]

I have NEVER charged for credit cards except to very few people who I only charge my costs where there is no profit to absorb the credit cards fees. These people include family and just a couple of very close friends. They knew that I was making exactly 0¢ from them so they would have to pay the credit card fees if they needed to use a credit card.

Now on to regular customers. I have charged shop supplies for almost the entire time I have been in business )coming up on 20 years) and have never heard any complaints or push back. But then again EVERY service business, from auto shops to dealerships, plumbers and electricians charge a supply fee so I think they are accustomed to it. My understanding is that if a business is audited by the state, they can't use the "shop supplies" charge, they have to itemize everything that they used that would fall under "Supplies" and make sure they paid sales tax on the appropriate amount for all of those nuts and bolts and subscriptions and chemicals, etc. The way I see it, I pay sales tax on a lot of stuff that would go into the "supplies" category like printer paper, hand soap, toner, lubricants (penetrating oil, silicone spray, etc.), first aid supplies, scanner updates and so forth that any supplies that I don't pay sales tax on would be negligible AND I charge sales tax on the shop supplies (since the state considers the items that are categorized as "shop supplies" as "taxable sales" anyway) so I believe that if I were ever audited, the state would owe me a refund based on the itemized sales' tax due vs. what was collected or paid at the time of purchase. So I am not concerned with an audit causing me problems other than the auditor being upset that I am doing business this way.

 

I do not currently and do not intend to charge my customers for using credit cards. I do educate them that it costs me several percent and their "rewards" are actually coming out my pocket because I am charged 1.++% for the privilege of taking their rewards card on top of the usual processing fees, all so the credit card company can be so generous to "give" them back 1%, maybe. I am a small shop and my credit card fees rarely exceed $600 a month. I too see it as a C.O.D.B. I would like to charge a fee for it, but I don't like paying it when I go to a merchant who charges it so I won't do that to my customers. I just absorb it from my profits, but I can see why some places would want to charge for their customers "convenience." As far as I am aware, no dealership charges this fee and few if any other independent repair shops in town charge a credit card fee.

[RYAN B]

I replaced four runflat tires on a Mercedes GLA250 yesterday, the tires were 268.88 each and we charged 35.00 to mount and balance each tire and 6.00 a tire disposal, now tire are very competitively priced, total job price was 1239.52 plus 74.37 in tax 1313.89. The credit card fees on that transaction were almost 39.50, were do you absorb or hide that when you are trying to stay competitive with your competition? As long as your transparent with your customers they know about the credit card fees. I made 248.00 on that job, thats a lot different than 208.00, thats almost 17% of your profit.  I tell the customers, I will give you a fair price but I can't absorb the fees and people give me cash or checks or they pay the fee.  

[Joe Marconi]

6 hours ago, RYAN B said:

I replaced four runflat tires on a Mercedes GLA250 yesterday, the tires were 268.88 each and we charged 35.00 to mount and balance each tire and 6.00 a tire disposal, now tire are very competitively priced, total job price was 1239.52 plus 74.37 in tax 1313.89. The credit card fees on that transaction were almost 39.50, were do you absorb or hide that when you are trying to stay competitive with your competition? As long as your transparent with your customers they know about the credit card fees. I made 248.00 on that job, thats a lot different than 208.00, thats almost 17% of your profit.  I tell the customers, I will give you a fair price but I can't absorb the fees and people give me cash or checks or they pay the fee.  

You should not eat the cc fees. How you choose to charge is your choice. For me, I add all my cc fees into my cost of doing business, just like all other expenses. I then know my breakeven, and amortize the cost of all my jobs, just like all other expenses. For me, my opinion, I rather not show the cc added fee on the invoice, so my way, the cc fees are paid for, just spread out over all the invoices the same as all other expenses: Utilities, office supplies, etc. Hope this helps.