What if charging customers a little extra at checkout didn’t send them running for the exit? New research on the topic of credit card surcharge small business strategy suggests that the long-held fear may not match reality. The numbers behind it are worth a closer look before any merchant decides how to price a transaction fee.
According to research published by Kurv, the payments company behind the study, in its report on how credit card fees affect small business growth, most shoppers say they’re willing to accept a checkout fee rather than walk away from a purchase at a local business. The findings may feel contrary to public opinion. In particular, small and medium-sized businesses (SMBs) have often treated card-processing costs as an unavoidable expense to absorb quietly, worried that passing even a small fee to customers would scare them off entirely.
Every time a customer swipes, taps, or enters a card number, the business pays an interchange fee — a service cost collected by the card networks and banks to process that transaction. Merchants sometimes try to offset this cost by adding a fee of their own, but not all fees work the same way. A surcharge is typically a percentage added specifically for paying by credit card. A convenience fee, by contrast, is usually a flat amount tied to using a different payment channel than a business normally offers, such as paying online instead of in person. The two are not interchangeable under card-network rules, and which one a merchant can legally use depends on the payment method, the card network, and the state or country involved.
The size of those intercharge fees have long been disputed by industry bodies and regulators. Thus, Visa and Mastercard have faced lawsuits on the matter, whether for not substantializing high fees with any objective factors, or creating unhealthy market conditions and bringing unjustified financial losses to retailers. In this regard, UK payments regulator, for instance, is working on introduction of a cap on cross-border interchange fees charged by Mastercard and Visa on credit and debit card transactions of UK businesses.
Payment Systems Regulator (PSR) found that UK businesses paid an extra £150-200 million in 2022 due to the fee increases. One of the 2023 lawsuits also concluded that the card companies needed to pay $5.6 billion to 12 million sellers who initiated antitrust proceedings linked to the charging of super-competitive fees for transactions on Visa/Mastercard payment cards. In many cases, SMBs tend to absorb those costs rather than passing the burden down to the customer, since more affordable prices can often be their only advantage against well-known big brands.
Kurv’s data offers a window into how customers actually respond. The company found that 65% of shoppers said they would pay a convenience fee to support a local business rather than shop with a national retailer instead. Among shoppers who encountered such a fee, 51% completed the purchase anyway, while only 6% canceled the transaction outright. Gen Z shoppers stood out in this scenario. They were 19–20% more likely than other groups to absorb the fee and, according to Kurv, 700% less likely to abandon a purchase because of it. Separately, the research found that 57% of SMBs identified inflation, not payment fees, as their top financial concern. These figures come from different questions within the same research and shouldn’t be read as describing a single scenario.
At the same time, it shouldn’t be interpreted as if hiking fees is absolutely consequence-free. Conversion rate — the share of shoppers who complete a purchase rather than abandon it, still depends on many factors. E.g. how a fee is presented, its size, and the loyalty a business has already built with its customers. What the data challenges, though, is the assumption that any checkout fee automatically kills a sale.
One must note though that rules on charging fees vary considerably by market. Visa’s guidance describes convenience fees as flat, clearly disclosed charges for an alternate payment channel, and notes that surcharging on credit cards in the U.S. is permitted only subject to applicable law and Visa’s requirements. It is not uniformly applicable across every state.
In the European Economic Area, the European Central Bank’s explanation of the revised Payment Services Directive confirms that merchants are generally prohibited from charging consumers extra for using specified payment methods, when both the customer’s bank and the merchant’s payment provider are located within the EEA.
Given how much these rules shift by location, merchants considering the totel fee and what should that include should check local law, their card network’s requirements, and their payment provider’s policies before making a change at checkout.
