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.