For dealerships, managing expenses is just as important as closing sales. With the increasing use of credit cards for purchases, service payments, and parts transactions, payment processing fees can take a significant bite out of profits. One effective way to offset these costs is through surcharging—a strategy that allows businesses to pass credit card processing fees to customers in a compliant and transparent way.
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The Cost of Credit Card Processing for Dealerships
Every time a customer pays with a credit card, dealerships incur a processing fee, typically ranging from 2% to 4% of the transaction amount. On high-ticket purchases such as equipment, repairs, and accessories, these fees add up quickly, cutting into profit margins.
For example, if a dealership processes $500,000 in monthly credit card transactions with an average processing fee of 3%, they could be paying around $15,000 in fees every month—$180,000 per year! Implementing surcharging can significantly reduce or eliminate this expense.
How Surcharging Works
Surcharging is the practice of adding a small fee to credit card transactions to cover the cost of processing. Instead of absorbing the fees and ensuring that the dealership keeps more of its revenue.
However, compliance is key—credit card brands and state regulations have specific rules that must be followed, including:
- Proper disclosure: Customers must be informed about the surcharge before completing their payment.
- State restrictions: Some states have regulations on surcharging, so dealerships need to verify compliance.
- Correct implementation: The surcharge amount must be calculated accurately and cannot exceed a certain percentage.
Why Surcharging Makes Sense for Dealerships
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Significant Cost Savings
By passing on processing fees, dealerships can save thousands of dollars each month, allowing them to reinvest in inventory, marketing, or operational improvements.
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Simple and Transparent Pricing
With surcharging, businesses can offer lower base prices, making their pricing structure more competitive while keeping profit margins intact.
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No Impact on Debit Transactions
Surcharges apply only to credit card transactions, meaning customers who pay with debit cards, cash, or checks are not affected.
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Seamless Integration with Payment Systems
With the right payment processing provider, surcharging can be implemented smoothly without disrupting the customer experience.
Gravity Payments: Your Partner in Surcharging
At Gravity Payments, we help dealerships implement surcharging correctly and compliantly. Our team ensures that your business meets all regulatory requirements while handling the registration process with credit card brands. With our solutions, dealerships can reduce costs, maintain compliance, and keep operations running smoothly.
Ready to Save on Payment Processing?
Contact us today to learn how surcharging can help your dealership maximize profits! Please fill out the form below.
