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

Joe Marconi
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Transmission Repair Experienced

Transmission Repair

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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.

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pfseeley442 Explorer

pfseeley442

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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. 

 

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RYAN B Apprentice

RYAN B

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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. 

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RYAN B Apprentice

RYAN B

Posted
Posted

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!

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  • 3 months later...
RYAN B Apprentice

RYAN B

Posted
Posted

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.

newport5 Enthusiast

newport5

Posted
Posted

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).

  • Like 2
Brian Smith Newbie

Brian Smith

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Posted
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.

  • Like 1
TheTrustedMechanic Community Regular

TheTrustedMechanic

Posted
Posted

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 Apprentice

RYAN B

Posted
Posted

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.  

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  • Have you checked out Joe's Latest Blog?

    • Joe Marconi
      The Technician Shortage Is Our Fault, And It's Time We Own It
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      The Technician Shortage Is Our Fault, And It's Time We Own It
      Nearly every day, I hear shop owners complain: "There's a technician shortage. We can't find qualified people. There's no one out there." If that's true, then who's to blame?
      The industry? The schools? The government? I don't know how you feel, but who promised us an endless supply of qualified technicians?
      Another common complaint is that young people do not want to work in the trades. Well, if that were true, then why are other trades such as HVAC, electrical, and plumbing growing? What are they doing that the automotive industry is not? 
      Here's the reality we need to face: We do have a problem, but we shouldn't look for someone or any entity to rescue us. Not the government. Not the trade schools. Not the recruiting companies. No one owes us a workforce. If we want great people in our industry, it's up to us. At some point, we need to own up to the truth: Building a pipeline of qualified technicians is our responsibility.
      In this blog article, I will break down the key reasons we are in this situation today and what we, as an industry, can do to solve the technician shortage. Are you ready to look in the mirror?
      Have We Pushed Technicians Away?
      Let's take a look at flat-rate pay. True flat rate, which pays a technician only for the hours they produce, is a controversial pay plan that emphasizes high production levels and creates a competitive work environment that, if not properly controlled, can lead to increased mistakes and a decline in morale and team spirit. Additionally, the stress and physical demands placed on technicians as they age are not favorable to long-term employee retention. What do we do with technicians as they grow older into their fifties and begin to slow down? 
      I have heard all the arguments and pros and cons of flat-rate pay, and I am not going to judge any pay plan. Let the facts speak for themselves. True flat rate has changed in most areas around the country and has evolved into a pay plan that gives technicians some pay guarantee.
      Many shop owners have learned that team morale, along with the opportunity to earn income, is important to technicians and to the company's long-term success. But let me ask you: how many technicians have left or been pushed out over the years because of the old flat-rate pay system?
      Another issue is the workplace environment. I remember being grateful to be hired as a young technician at a local repair shop. While very thankful, the work environment was not ideal. The shop owner kept the bay doors open year-round (I am from New York) unless it rained or snowed. He felt that if the bay doors were closed, customers might think we were closed for business. We had no heat and no hot water. Many of the jobs were done outside, year-round,  in all types of weather. The starting pay was minimum wage, with no benefits, sick days, or vacation pay. 
      Now, again, I need to point out that I was truly grateful for the opportunity this shop owner gave me. I learned a lot working there, and the experience was pivotal in my career. But looking back, I wonder how many people were discouraged by these working conditions?
      While the physical demands of the repair workplace are daunting, perhaps even more critical is the culture. Too many of my generation shop owners preached the mindset of "my way or the highway." We were the business owners, after all. We started our companies, took all the risks, and provided jobs. Why shouldn't we be the ones to set the ground rules our way?   
      Many of us found over the years that the "my way or the highway" mentality was a sure way to isolate employees and make them more likely to look over the fence for greener grass. In other words, it led many technicians to seek employment elsewhere, where they felt they could be appreciated and recognized for their hard work. The issue, however, was that there wasn't much green grass around. Disappointment after disappointment, bouncing from repair to repair shop, eventually led to despair. So, I ask you: were workplace conditions a contributing factor in today's technician shortage?
      Another factor that we are all well aware of is the complexity of the modern automobile. When I started, the work was mostly physical, and you were required to master essentially three vehicle models: General Motors, Ford, and Chrysler. Let's fast-forward to today. The evolution of automotive technology, along with the extensive training and tools required, has outpaced the typical technician's pay compensation, with no clear career path. Again, leading to frustration and insecurity about the future.
      Here is the bottom line: people don't leave their job; they leave their experience. We must do a better job. 
      The News Isn't all Bad; Your Next Steps to Fix the Technician Shortage
      To fix the technician shortage, it will take a combined effort from everyone in the automotive industry, particularly automotive shop owners. Shop owners are in the perfect position to make the greatest impact, not only on their businesses but also on the future automotive workforce.
      First, shop owners must become better leaders and understand that their ultimate success is directly dependent on the people they assemble around them. Any shop owner who mistakenly believes they can build an empire solely on their abilities is destined for serious disappointment. Business owners who think like this will eventually plateau. Without the collective contributions from a team of qualified people, your business will stall; it will not continue to grow.
      Create a workplace that attracts top talent: a clean, professional, well-equipped facility designed to support productivity, teamwork, and a career, not just a job. Build a great reputation in your community by getting involved locally. Become the auto repair shop that people take notice of as "the" place to work.
      Next, shop owners must become more financially knowledgeable. Knowing your numbers and what you need to achieve for a strong bottom-line profit is essential to paying technicians the money they need and deserve. Profit will also allow you to compete with other trade industries by providing a benefits package that has real take-home value and security.
      When it comes to culture, this is where the rubber hits the road. People crave recognition, praise, and a sense of purpose. Despite what you hear, people are not just money-motivated. Once people feel secure in their financial situation, retaining and motivating technicians can only be achieved by connecting with them on an emotional level. You cannot show enough appreciation. Give out praise for a job well done as if your business depended on it, because it does.
      As technicians age, we need to have a place for them. Expecting a 58-year-old to perform like a 35-year-old is unrealistic. We need to be more focused on career pathing. Provide training, skill development, and coaching to develop leaders and mentors within our older workforce. While their bodies may have slowed, the knowledge they have gained is priceless. 
      Our future is dependent on young people entering our industry. We need to give more young people opportunities. Every shop owner across the country should consider hiring an apprentice, then build an apprentice training plan and career path for them. If every shop did this, we could solve the technician shortage within five years. Get involved with the trade schools and high schools in your area. Look into the NAPA Apprenticeship Program. Don't sit on your hands with this one. Do it today.
      Lastly, don't get left behind. Commit to ongoing training for all your employees. Keep up to date with tools and equipment tailored to your business model. Don't try to be all things to all people and all vehicles. Identify your core profile customer and the vehicles they drive, and become an expert on those vehicles and the services you offer.

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