Mitchell businesses navigate new Visa surcharge rules amid rising costs
Jennifer Leither, The Daily Republic, Mitchell, S.D.
5 min read
Jan. 28—MITCHELL — A recent change to Visa's rules regarding surcharges on credit and debit card payments has left Mitchell-area businesses and consumers navigating a new landscape.
The new regulations, which limit the service fees merchants can charge customers, have led to confusion and concern, particularly after an email from First Dakota National Bank last fall clarified the updated rules.
Previously, many local businesses added a surcharge — a percentage added to a customer's bill when they paid with a credit or debit card. This surcharge helped cover the costs associated with processing card payments. Under the new Visa guidelines, however, merchants can no longer charge a fee just to cover card processing costs.
Shelly Eilers, a senior vice president of digital banking solutions at First Dakota National Bank, explained the bank sent out the email to educate businesses about the changes. However, the message caused confusion for some recipients, who initially interpreted it to mean that surcharges were no longer allowed.
According to Visa's updated guidelines, businesses can still add a surcharge, but it cannot exceed 3 percent. The fee must be clearly disclosed to the customer, be limited to the actual processing costs and be applied equally across all payment methods.
For businesses that currently charge a surcharge, the email offered several alternatives, including adjusting prices to include processing fees, offering discounts for cash payments, which incentivize customers to use cheaper payment methods and charging an administrative fee that applies equally to all customers, though this cannot be justified as a processing fee. Each of these alternatives requires clear disclosure, such as showing both the base price and any additional charges on receipts.
According to a representative from Visa, the new rules regarding surcharges were designed to ensure fair practices for both businesses and consumers.
"Our goal is to ensure that every Visa cardholder can use their Visa card wherever they wish to shop," the representative explained in an email to the Mitchell Republic.
While the new rules have created challenges, many area businesses are adjusting their pricing strategies.
Teresa Bathke, co-owner of Plank Inn Bar and Grill in Plankinton, is among those who have embraced surcharges.
"We haven't had any customers complain. It's basically add the fee or raise prices," Bathke said.
Bathke's restaurant charges a surcharge for card payments but makes sure to be transparent with customers.
Ed Anderson, owner of Ed's Pet World, has opted for a dual pricing strategy. He charges a higher price for credit card payments and a lower price for cash payments.
"If you pay with a credit card, you pay the higher price. If you pay with cash, you get the discount," Anderson explained.
Anderson has worked to be upfront with his customers about the fee.
"I try to be as transparent as I can, especially on big-ticket items like pets," he said. "If you're buying a dog for $1,000, it might be worth it to pay with cash to save some money."
He initially posted his pricing information on the store door but now places it near the cash register for better visibility.
For some, the new rules simply require a shift in strategy. Joshua Drury, owner of Shenanigans Tattoo Company, prefers to absorb the fees as a cost of doing business.
"It's just one of those expenses you have to deal with as a business owner," Drury said. He prefers to keep pricing simple and not pass the processing costs directly onto his customers.
While some businesses have found ways to adapt, the new Visa rules add to the growing list of financial pressures small business owners face. Credit card transaction fees, along with rising costs on utilities to labor, continue to squeeze businesses.
"It's getting harder with rising costs," said Sherry Hines, former owner of Fashions Unlimited. "We factor in those fees, but it's becoming more challenging to make a profit."
The pressure on small businesses is compounded by the fact that each payment processor may have different rates and rules. Anderson, for instance, works with Phase 3 Payments out of Sioux Falls, which offers a range of processing plans for small businesses.
Consumers, too, are feeling the pinch. While some, like Mitchell resident Carl Plastow, understand the need for businesses to cover card processing costs, others are frustrated. Amanda Sheets, a local consumer, sees surcharges as part of a bigger issue with credit card usage.
"Every time we swipe a card, it's like we're losing 3 percent of the value of our money," Sheets said. "Businesses get hit from every angle — merchant fees, service charges, bank account fees. It's no wonder small businesses are closing."
Despite the mixed feelings about surcharges, many consumers acknowledge that businesses shouldn't bear the full brunt of credit card processing fees.
"I get it. It shouldn't fall on the business to eat those fees," Plastow said.
However, Sheets' concerns reflect a broader dissatisfaction with the growing costs of credit card usage.
"It's not just the fees. It's all the extra charges," she said. "It affects everyone in the long run."
Despite the challenges of rising transaction fees and increasing operational costs, many business owners are adapting to the new rules and working hard to keep their businesses running smoothly. However, for Anderson, the key remains straightforward.
"It's not about making money off the fees — it's about covering costs so we can keep providing the products and services people want," Anderson said.
