Who Pays the Credit Card Fees in Construction Debt Collection?


Who Pays the Credit Card Fees in Construction Debt Collection?

With modern payment technologies, more and more customers are paying off their debts with accounts linked to credit cards. Such payment methods often come with additional bank fees. Until recently, New York banned companies from adding a surcharge fee for paying by credit card. This left material suppliers paying these fees or incorporating them into pricing.

Changing Laws in New York

Earlier this year, a New York settlement in courts allowed retailers to apply surcharges for non-cash transactions. New York merchants are now allowed to charge customers for the credit card surcharges as long as the merchants provide the calculations. You currently have the option to pass credit card fees to customers, including customers who are paying off debts.

New York-based material supplies likely already have credit card fees baked-in to the pricing because of the previous state law banning the practice of adding surcharges to credit card transactions. So should building materials providers change pricing model now that the law has changed?

Pros and Cons of Credit Card Fees

Credit card companies charge fees per transaction. Each transaction can have a processing fee of 2 - 5 percent. A customer who uses a card to pay off the debt over time will incur far more surcharges than someone who pays cash upfront for building materials. The most substantial benefit of surcharging is that the burden of this expense no longer falls on the supplier.

The main drawback of shifting the burden is customer opinion. People dislike change. Customers who are accustomed to paying by credit card may balk at the new policy. You may end up losing customers to competitors who don’t charge credit card fees.

At The Kaighn Company, we offer experienced debt collection solutions. Schedule a time to talk—call 908-319-5155 or email cmdevito@kaighnco.com.

Alison De Vito