Making the Case to Pass the Fee Pt 2

Interchange Plus Rate Increase to Cost Merchants $475M in Additional Processing Fees Over the Next Year.


Over the next year, your cost of processing card payments will rise significantly! There are few things you can do about it. After all, Visa, Mastercard, AmEx, and Discover hold all the cards! However, there is one way to avoid the coming rate hike and even reduce your costs…. Sky has the solution to help.

It’s not a stretch to assume businesses are still recovering from the COVID-19 pandemic. As stated in a previous Sky Systemz blog post, and as described in the above graphic, net profit margins dropped by double digits between 2019 & 2020. With the re-opening of the economy, businesses that survived the forced closures due to the pandemic are starting to rebound. However, inflation is at an all time high, there are still significant supply chain issues, and the cost of fuel has increased nearly 27% since November of 2020 further driving up the cost of goods sold. Business owners are faced with the choice of ‘eating’ the price increases or passing them along to their customers. So, when the major credit card companies announced an increase in interchange rates for March 2022, it feels like a double punch in the gut to retailers who are already struggling to maintain their bottom line.

During the pandemic, the major credit card companies did not increase rates for businesses which typically would have been re-evaluated twice per year. These newly announced interchange rate increases are estimated to cost U.S. merchants upwards of $475 million in additional transaction fees according to CMSPI, a research firm in the United Kingdom.

With the coming increases, there is no better time to talk about “Pass the Fee”. Sky Systemz is a Digital Payments and FinTec company that prides itself on being an all-in-one solution for medium sized businesses. Our operations suite of software comes loaded with Cloud POS, Invoicing, Digital Ticketing, Subscriptions, Customer and Inventory Management and much more.

One of the things that we do differently is we build the Pass the Fee option directly into our dashboard. So unlike other digital payment providers where you have to do some creative math, we do it with a single mouse click. (Just make sure it’s legal in your state, a few states do not allow passing processing fees to customers.)



We conducted a case study with one of our merchants that switched from Square because of Sky’s Passing the Fee feature. Their first month in business with Sky, they processed 963 transactions totaling $52,266.65 in gross revenue. We calculated that they saved $1,528.37 in fees! We also figured how many products they were ‘giving away’ before they made the switch. As you can see, this is equal to giving away 306 – $5 items… WOW!

As you can see, passing the fee significantly increases your bottom line month-to-month. So why is it such a divisive topic for merchants? Some believe that passing the fee will result in negative reactions from customers. In our experience, most customers understand and are happy to pay the fee or simply pay cash to avoid it. For the one or two people that want to raise a fuss, you have the option of easily turning the feature off for a single transaction.

“Passing on cost increases has always had a potential negative effect on sales volume and resulted in unpleasant customer reactions until recently.  Nowadays, people are so aware of inflation in the news, they accept the cost increases with barely a whimper fortunately. It’s a new phenomenon.”, says Ray Dietrich (owner & operator of Rivertown IGA).

To the left you can see an example of what the customer’s receipt will look like should you choose to pass the fee. Customers are already accustomed to paying processing fees on their electric bills, utilities, cell phone provider, license, etc… And as Ray said they are becoming accustomed to paying more for products in the stores. So it is not out of line for a small business to expect the same courtesy for the convenience of using a credit card. This is also an opportunity where a business might persuade the use of cash to avoid paying the fee. Should you choose to pass the fee, you will need to ensure it is clearly posted in your retail location or on your website if you are a service provider.

Of course, if you decide passing the fee is not for your business, you can still enjoy industry low rates by switching to Sky. You can learn more about our Pass the Fee pricing HERE. If you would like to learn more about Passing the Fee, contact us at sales@skysystemz.com.

“Passing on cost increases has always had a potential negative effect on sales volume and resulted in unpleasant customer reactions until recently.  Nowadays, people are so aware of inflation in the news, they accept the cost increases with barely a whimper fortunately. It’s a new phenomenon.”, says Ray Dietrich (owner & operator of Rivertown IGA).