Last time I wrote about what it costs to chase a late invoice. This one’s about the invoice that actually got paid — and still came up short. You billed $3,200, the client paid $3,200, and the deposit that landed was something like $3,105. That gap is the subject.
Most owners I talk to can tell me their rate. Very few can tell me what they actually paid last month. Those are different numbers, and the distance between them is usually where the surprise lives.
The rate you were quoted isn’t the rate you’re paying
Somebody sold you on a number. Two-point-something percent. It was true, in the sense that it applies to some of your transactions some of the time. But your card mix isn’t one card. A basic consumer debit card and a corporate rewards card are not the same cost to you, not remotely, and the pretty number on the sales sheet was quoted off the cheap end.
The number that matters is your effective rate: total fees divided by total volume, for the month. Not the quoted rate. Not the rate on one line of the statement. Everything they took, divided by everything you ran. Go pull your last statement and do that division. It takes two minutes, and for a lot of shops it’s an uncomfortable two minutes.
Where the rest of it hides
The headline percentage is only part of the bill. The rest is scattered across the statement in places designed not to add up in your head:
- Per-transaction fees. A dime or fifteen cents a swipe sounds like nothing until you’re running a few hundred a month.
- Rewards and commercial cards. That points card your customer loves costs you more to accept. The nicer the card, the more it costs you.
- Keyed and card-not-present. Anything typed in rather than dipped generally costs more, because it’s riskier. If you invoice, this is most of your volume.
- The monthly furniture. Statement fee, PCI fee, gateway fee, batch fee, monthly minimum. Small, fixed, and permanent.
- The annual surprises. PCI non-compliance charges, and the occasional chargeback fee that costs you more than the disputed sale.
- Software that takes a cut. If your invoicing tool also takes a percentage, you’re paying twice on the same dollar — once to process it and once to send the invoice.
So what’s dual pricing, actually?
“Dual pricing” just means showing two prices: one if they pay with cash or bank transfer, one if they pay with a card. The idea is that the cost of accepting the card lands on the transaction that caused it, instead of coming out of your margin on every sale.
In practice this gets implemented two different ways, and people mix them up constantly even though they’re treated very differently:
- Cash discount. Your listed price is the card price, and customers who pay cash get money off. The discount is the thing you’re advertising.
- Surcharge. Your listed price is the cash price, and a fee is added on top when someone pays by credit card. The fee is the thing you’re adding.
Same economics, different mechanics — and importantly, different rules. Surcharging in particular is the one with real strings attached.
The rules you can’t hand-wave
This is where I have to be straight with you rather than sell you something. Surcharging is governed by a mix of state law and card brand rules, and both have moved around over the years. A few things are consistent enough to plan around:
- Debit is off limits. You don’t surcharge a debit card, even when it’s run as credit. Same for prepaid. This one isn’t negotiable.
- It has to be disclosed before they pay. Clearly, up front, and again on the receipt. A fee somebody discovers after the fact is the fastest way to a chargeback and a bad review.
- It can’t exceed what it costs you. A surcharge is meant to recover your cost of acceptance, not to be a profit center. There are caps.
- Your state may say no. Some states restrict or prohibit surcharging outright, and the rules have genuinely changed over time.
- Card brands want notice. The networks generally expect to be notified before you start surcharging.
I’m not your lawyer and I’m deliberately not quoting you a percentage cap or a list of states, because those specifics change and a blog post is exactly the wrong place to trust on that. Confirm the current rules for your state and your card brands with your processor before you turn anything on. What I can tell you is that a properly configured program handles the debit exclusion and the disclosures for you — and if the one you’re being sold doesn’t, that’s the tell.
Collect runs dual pricing as part of the platform — both prices disclosed on every invoice and receipt, and ACH, cash, and check always pay the cash price. Worth knowing that most invoicing tools don’t do this at all, and most processors sell it to you as a separate line item.
How to roll it out without blindsiding anyone
The economics of this are easy. The customer relationship is the hard part, and it’s where these programs actually fail. What works:
- Tell people before the invoice, not on it. A short heads-up email to existing clients beats a surprise line item. Nobody minds the policy; they mind finding out about it the hard way.
- Give them a free way to pay. ACH or bank transfer at no fee turns the conversation from “you’re charging me more” into “here’s how to avoid it.” Most business clients will just switch.
- Put it in plain words. “Card payments include a 3% processing fee. Bank transfer is free.” Don’t bury it in a terms page.
- Watch your big accounts. Your biggest client is also your biggest fee line. Sometimes the right move is a quiet conversation instead of a blanket policy.
The part worth remembering
You are already paying this. Every month, on every card sale, out of margin you earned. Dual pricing doesn’t create a cost — it moves an existing one out of the shadows and onto the transaction that caused it. That’s the whole trick.
Start with the division problem. Pull last month’s statement, add up everything they took, divide by what you ran. Whatever that number is, it’s the real one. You can’t make a decision about any of this until you’ve seen it.
Previously in this series: What chasing late invoices actually costs you. Want the automated version? Try Collect free.