Building credit card processing fees into your pricing is one way to stay profitable when surcharging your clients isn't an option. This guide walks through how to calculate your effective processing fee, adjust your rates to cover it, and review your pricing as your business grows.

When you accept credit card payments from your clients, your payment processor charges a fee for its services, typically ranging from 2% to 3% of the transaction value. Processing fees are a normal cost of doing business: they help keep transactions secure and streamlined for your clients. These fees may seem small on a per-transaction basis, but they add up over time. As a business owner, there are two distinct ways to address them.

Picture this: you're at your favorite coffee shop, and you decide to treat yourself to a latte. When you hand over your credit card, the barista lets you know there's a small fee for using a credit card instead of cash. That fee is a surcharge.

At this point, you might decide to pay with cash to avoid the extra fee, or you might still pay with your card because it's convenient. If you pay with card, the merchant accounts for the processing fee by applying the surcharge. If you pay with cash, the processing fee doesn't apply, so the merchant can charge you a lower amount. Either way, the processing fee is accounted for. Dubsado's surcharging feature is an example of a direct surcharge.

Using the same example: if you go to buy a latte and it costs $1.00 more than it did last week, you might ask about the increase. The barista explains that the business's costs have gone up, so they needed to raise their prices. If you love this coffee shop, you're likely to keep supporting them.

In this scenario, the coffee shop's prices went up a small amount, regardless of your payment method. If you'd prefer not to use a surcharge, or your region doesn't allow it, pricing your services to account for processing fees is a way to implement indirect surcharging.

To understand the difference between direct and indirect surcharging, consider how each plays out using a starting price of $100.00 with a 2.9% + 30¢ credit card processing fee.

With no surcharge, a $100.00 payment stays at a $100.00 total, but the processing fee ($3.20) comes entirely out of what you receive, leaving you with $96.80.

With a direct surcharge, the client's payment total becomes $103.00 (the original $100.00 plus a $3.00 surcharge). The processing fee on that total is $3.29, which leaves you with $99.71.

With an indirect surcharge, you raise your price to $105.00 up front. There's no separate surcharge line, so the payment total is $105.00. The processing fee on that total is $3.35, leaving you with $101.65.

In this example, both strategies result in a good outcome. Direct surcharging almost entirely offsets the processing fee, and indirect surcharging leaves you with a little more than the original $100.00 asking price.

Now that the basics are clear, there are two paths forward. If you're interested in direct surcharging, Dubsado's surcharging feature will let you know whether it's available for your region during setup.

If you're ready to learn about indirect surcharging, you're in the right place. The rest of this article breaks it down into steps.

Start by pulling your payment processing statements and calculating the average fee you're currently paying based on your transaction history. This baseline drives every adjustment that follows.

For example, if you book projects with an average payment of $2,000.00 and a credit card fee of 2.9% + 30¢, which is the standard Dubsado Payments processing rate, the math looks like this for a single client:

Now say you book 10 clients per year at this price point:

The fees you pay scale with every dollar you bring in, which is where raising your prices comes into play: your pricing can prepare you for these fees.

To cover processing fees, build the fee percentage into your pricing structure. For example, if your average fee amounts to 2.9%, consider increasing your rates by roughly that amount. This helps your business stay profitable while covering the cost of accepting credit card payments.

Keep these things in mind when raising your prices:

Here's how that math plays out for a sample suite of web design packages, assuming a 2.9% + 30¢ processing rate.

Before any adjustment:

If two clients purchased the entire suite each month, that's a total of $407.62 you'd be losing to credit card fees.

When increasing your pricing, it helps to keep the price itself looking clean to clients. Tacking $14.71 onto the $497.00 strategy call brings it to an odd $511.71. Instead, rounding the increase to $527.00 covers the processing fee and leaves you with more than you started with.

Here's how the adjusted package prices look:

After the adjustment, the amount you receive is higher than the original package price, which more than covers the processing fees. You're still paying credit card fees, but increasing your prices a little helps cover them.

For example, charging $2,100.00 for credit card payments but only $2,000.00 for ACH payments on the same $2,000.00 service isn't allowed: prices are being adjusted for a specific payment method instead of being raised across the board.

If you accept ACH payments alongside credit cards, keep in mind that ACH transfers typically carry a different, often lower, processing fee, so your pricing strategy may look different depending on how a given client prefers to pay.

Processing fees aren't static. As your client mix changes (more international cards, larger transactions, more autopay), your average effective fee can drift.

Review your payment processing statements regularly, such as monthly or quarterly. Adjust your pricing if the average fee moves materially, and communicate any changes clearly with your clients to maintain trust.

Calculate your processing fee based on your payment processor, and figure out how much that fee eats into your current price. Increase your pricing to cover that amount, and round to numbers that look clean to clients.

It depends on where you're located. Some regions don't allow surcharging at all, so you'll need to bake fees into your pricing instead. In other regions surcharging is permitted, but it's worth checking with a legal professional to confirm your specific situation. Dubsado's surcharging feature will confirm your eligibility based on your business address.

Charging different prices based on payment method can run into anti-discrimination laws in many regions, and card network rules generally prohibit it. If you can't or don't want to surcharge, build the cost into your overall pricing and communicate that openly with clients.

Reviewing monthly or quarterly is a good habit. If your business starts taking on more international clients or higher-ticket projects, your effective fee may shift noticeably. Adjust your pricing if it does, and communicate those changes clearly to maintain client trust.