As a wedding or event vendor, credit card payments are a convenient option for clients. But for businesses, those processing fees can really add up. Many vendors are now considering whether to pass those fees onto their clients. Is it the right choice? In this blog, we’ll break down the pros and cons, explore why Rock Paper Coin (RPC) makes this process easier, and touch on the tax benefits of processing fees.
When it comes to credit card fees, there are a few factors to consider. Let’s dive into the pros and cons of passing those fees along to your clients.
The Benefits of Passing Fees to Clients
- Recovering Costs: By passing credit card fees to your clients, you avoid absorbing these costs yourself. This is especially helpful for businesses that need to protect their bottom line.
- Transparency: Let’s be real—most clients are used to paying fees. If you’re upfront about them, they’ll appreciate your honesty and know exactly what they’re paying for.
- Predictability: With fees covered by the client, you can have more predictable financials without worrying about fluctuating transaction costs.
The Drawbacks of Passing Fees to Clients
- Client Reactions: Some clients may not love paying extra fees on top of your services. It could make your pricing look higher compared to others who absorb those costs.
- Legal Restrictions: In some areas, passing along processing fees is actually illegal or regulated. Be sure to check local laws before implementing this approach.
Rock Paper Coin: Simplifying Payment Processing
With Rock Paper Coin, you have the flexibility to pass processing fees directly to your clients, making this whole process much simpler. You get low, predictable fees without worrying about the unexpected costs that come with other processors. Plus, RPC’s payment system is transparent, so both you and your clients are always in the know.
RPC makes it easy to manage payments without the headache of fluctuating fees. By giving you the option to pass those fees along, you can keep your finances steady and focus on what matters most—running your business.
Tax Benefits of Processing Fees
Here’s the good news: credit card processing fees are generally considered a business expense, meaning they can typically be deducted when filing your taxes. Even if you decide to pass those fees on to your clients, your business is still technically incurring the cost, so you can usually write them off as an operating expense.
However, if you’re passing fees to clients, it’s important to keep in mind that the revenue you generate from those passed-on fees might need to be treated differently. Keep in mind that tax laws vary, so it’s always a good idea to check with a tax professional to make sure you’re getting the full benefit.
Legal Considerations: Convenience Fees vs. Surcharges
If you’re considering passing along processing fees to clients, it’s important to understand the difference between convenience fees and surcharges—and the legal implications of each.
- Convenience Fees: These are legal in all 50 states and apply when a business charges a fee for allowing customers to complete a transaction remotely—such as online, via mobile app, or over the phone. Convenience fees must be disclosed upfront and applied consistently.
- Surcharges: These are additional fees added for choosing to pay with a credit card instead of cash. Surcharges are restricted or banned in some states, including Connecticut, Massachusetts, and California (as of July 2024). If allowed, surcharge fees are typically capped (e.g., Visa and Mastercard limit them to 4%).
Because Rock Paper Coin transactions take place online, businesses using RPC can legally apply a convenience fee in all states, making it a great way to offset processing costs while staying compliant with regulations. If you’re unsure about the rules in your area, consult with a legal professional or payment processor.
Should You Pass Processing Fees to Clients?
At the end of the day, whether or not you pass credit card processing fees onto your clients depends on your business model, customer expectations, and legal guidelines. Passing fees can help protect your profit margins, but it’s important to think about how it might affect client relationships and your competitive edge.
With Rock Paper Coin, you get the flexibility to manage payments in a way that makes sense for your business. With low, predictable fees and the option to pass those costs onto clients, RPC takes the stress out of payment processing—so you can focus on what you do best.
Interested in learning more? Check out our previous blog post on writing off processing fees for qualifying businesses.
