How do I add the credit card processing fee to an invoice without being charged the processing fee for the base amount AND the processing fee? (2024)

FAQs

How to include credit card processing fees on an invoice? ›

Rules and regulations surrounding surcharges

While adding surcharges to the cost of a purchase is now legal in nearly all states, businesses and merchants must follow rules regarding how such fees are implemented. In addition, each credit card brand has its own rules that merchants must adhere to.

Go to Account & Settings from your online Square Dashboard. Click Business information > Service charges. Under 'Create an automatic card surcharge,' click Create card surcharge. Enter a surcharge amount to cover your card processing fees.

Credit card fees are not deductible for individuals and are deductible for businesses. Businesses can deduct all credit card fees as well as finance charges. Businesses are eligible to deduct credit or debit card processing fees associated with paying taxes, but individuals are not.

Seeing retailers offer discounts for cash payments — or assess fees when customers pay by credit card — is becoming more common than ever. In most U.S. states, adding convenience fees to credit card transactions is legal, but there are still rules businesses must follow when doing so.

Q: How should businesses notify customers about convenience fees? Businesses must clearly and conspicuously notify customers about convenience fees before the transaction is completed. This can be done through ample signage in-store, clear messaging during online checkout, or verbally over the phone.

While the California Civil Code Section 1748.1 prohibits retailers, including service providers, from imposing surcharges on customers who choose to pay with a credit card, it also allows retailers to offer discounts to encourage payment by cash, check, or other means.

A surcharge is not a convenience fee. A convenience fee is levied by a merchant for offering customers the privilege of paying with an alternative non-standard payment method. Merchants can process convenience fees in all 50 states. A surcharge is levied by a merchant for customer purchases made with a credit card.

In most cases, credit card processing fees will run between 1.5% to 4% of the total value of a transaction. A $1,000 transaction, therefore, could have fees ranging from $15 up to $40.

One straightforward way to pass Square processing fees to your customers is by including a dedicated line item for the fee in their purchase invoice. By clearly labeling this line item as “Square Processing Fee,” you inform your customers about the additional charge associated with their transaction.

How do I add a CC fee to an invoice in QuickBooks? ›

There are legal options for passing on credit card fees to customers. Credit card surcharging and cash discounting are the two main options for passing on fees. Adding a surcharge to credit card payments is not legal in every state, but offering a cash discount is.

Convenience fees can be a fixed dollar amount or a percentage of the transaction amount (usually 2 to 3 percent) and must be disclosed to the customer in advance. Ways to charge credit card fees to your customers: Add a line item for credit card surcharge to the invoice and add a standard amount to each invoice.

Treating the fees as a cost of sales (also known as the cost of goods sold) would put them at the top section of your income statement. This means the fees will be deducted to arrive at your gross margin. Therefore, the formula would be: Income – Cost of Goods Sold – Credit Card Fees = Gross Profit.

Taxes can be complicated. Fortunately, it's not confusing to know if you can deduct credit card processing fees: yes if you're a business, no if you're an individual. Making sure you have the right payment processor that's not charging you too many fees is the best approach to saving money.

Surcharges and convenience fees are both additional charges that businesses add to their customers' bills. However, surcharges are added to the transaction amount only when customers choose a credit card as their payment card.

They are usually reported as a separate line item under selling, general, and administrative expenses (SG&A), or as part of cost of goods sold (COGS) if they are directly related to the sales revenue.

A standard wording could be: “A credit card convenience fee of [percentage or flat amount] will be applied to all transactions.

The same rule applies to credit card processing fees. California views these fees as expenses the employer should have to pay, not the employee. Therefore, California employers may not deduct credit card processing fees from employee tips.