Credit cards have become the dominant method of payment in consumer transactions, with studies showing only 9 percent of Americans use cash as their primary form of payment.1 That trend is making its way into business-to-business (B2B) payments to an ever-increasing degree. Although convenient—and in many instances necessary—as a method of payment, credit cards are also the most expensive method of payment for a merchant to accept. The costs of accepting credit cards, commonly referred to as swipe fees, comprise an alphabet soup of charges imposed at each step of the card payment process. That panoply of fees typically ranges from 2 percent to 5 percent of the payment amount, which can make a significant impact on the merchant’s bottom line, especially in an inflationary environment. This leaves merchants between a rock and a hard place: How can they prevent credit card swipe fees from eroding their margins while still remaining competitive in the marketplace?

The simplest solution (at least in theory) is to add a surcharge to credit card transactions to recover some or all of the associated swipe fees. Following a settlement of antitrust litigation against Visa and Mastercard in 2012 and a series of court decisions invalidating various state laws prohibiting merchants from imposing a surcharge on credit card payments, merchants in the retail arena have begun doing just that. Other options include cash discounts, convenience fees, and dual pricing (listing separate prices for cash and credit card sales), but merchants must be mindful of the ever-changing regulatory landscape governing these mechanisms.

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