What is up?
And welcome back to the Thriving Stylist Podcast.
I’m your host, Britt Seva, and our annual Leadership One Week Bootcamp is back with fresh topics and exercises.
So all my salon owners listening to this one, this is for you.
We are calling this our Salon Owners Rapid Growth Roadmap Bootcamp.
And in just seven days, I’m covering how to make uncapped commissions, a salon owner’s best path to long-term growth, finding the profit margin even in booth rental salons, creating a strategy to market yourself as the number one place to work in your community, structuring the salon in a way that fits your lifestyle as a leader, and so much more.
That was like a 10-second summary.
We are covering so much in seven days.
You’re going to absolutely love it.
Plus, this will be the first preview of our updated Thriving Leadership System with our new Iceberg Leadership Method.
Nobody has seen this before.
And it’s the turnkey salon leadership solution we’ve all been waiting for.
I just cannot even wait to get this out into the world.
So if you want to learn more about this one week digital training, head to www.thrivingstylist.com/rapidgrowthbootcamp.
Thrivers Society members, you will register for free directly through your learning portal.
But if you are not a Thriver yet, you can check out boot camp details and save your seat at thrivingstylist.com/rapidgrowthbootcamp.
Boot camp kicks off on August the 18th.
I cannot wait to see you there.
Do you feel like you were meant to have a kick-ass career as a hair stylist?
Like you got into this industry to make big things happen?
Maybe you’re struggling to build a solid base and want some stability.
Maybe you know social media is important, but it feels like a waste of time because you aren’t seeing any results.
Maybe you’ve already had some amazing success but are craving more.
Maybe you’re ready to truly enjoy the freedom and flexibility this industry has to offer.
Cutting and coloring skills will only get you so far, but to build a life long career as a wealthy stylist, it takes business skills and a serious marketing strategy.
When you’re ready to quit just working in your business and start working on it, join us here where we share real success stories from real stylists.
I’m Britt Seva, social media and marketing strategist just for hair stylists, and this is the Thriving Stylist Podcast.
What is up and welcome back to the Thriving Stylist Podcast.
I’m your host, Britt Seva, and today we’re talking about processing fees or surcharges and passing them on to your clients and if that’s trending, and if we should do it or if we should skip it and all the things.
I just want to have an open conversation about it, and this topic was not my doing.
This was another very inspired episode thanks to Hannah Elizabeth Kay.
Hannah left a rating and review on iTunes, which is the best way to get a podcast episode suggestion in to me.
And what she writes is, “Hi, I’ve been thriving since 2019.
When I found you, it was like you were speaking my language for the first time.
I was hearing someone speak the values that were in my heart.
It was validating and I learned how to turn them into action.”
Hannah, that makes me so happy.
It’s an honor to work with you.
And then she says, “I was wondering as a consumer behavior is changing about charging clients the processing fee.
I know this is a hot button topic, but it’s also becoming the norm.
It feels tacky, but at the same time, it seems like most clients don’t care.
Disclaimer, I haven’t implemented this, but I’m trying to weigh.
From a business standpoint, it makes sense.
I could do a lot more for my staff with that money, but I also wonder what it does to a stylist’s tip, for example.
A lot of salon owners in my area have implemented this and say they have lost zero clients.
They’re also owners and I believe and trust.
I’d love your insight.
Thank you.”
Great question.
I want to give some context.
When we’re talking about processing fees, we’re talking about, you know how when you swipe a credit card, there is a percentage that goes to the credit card processor.
It’s anywhere from usually two point something percent to three point something percent, depending on who your processor is, and you as the business owner or service provider have to pay that.
There’s a deduction that’s taken care of as part of that processing fee.
If you ran $100,000 in service transactions, as a business owner, you’re going to pay, call it $2,500 in credit card processing fees or whatever.
We have some salons who do a million dollars in business, so now you’re talking more like $25,000 in credit card processing fees.
I mean, it adds up, so I don’t know what this owner is doing in revenue, but no matter what, two to three percent is a significant portion, so I get it.
I pay it.
We run our entire business on credit card transactions.
There is no cash element to our business, so we’re paying this at scale.
And I totally get it.
I completely understand.
We always say, it’s tax deductible, which is nice.
It reduces your tax implication, which we talked about in a previous episode and how all that works.
But still, money in your pocket is better than pretty much anything in business.
And so what she’s asking is, what should I do?
Should I pass this fee on to my clients?
How does that work?
What’s the norm?
What do I suggest?
Is that going to negatively impact gratuity potentially?
A couple of things she mentioned I want to dissect.
That last part, a lot of salon owners in my area have implemented this and say they’ve lost zero clients.
There is not a salon owner in the world who has lost zero clients in the last three months.
That’s not a real thing.
The best, the highest performing, highest retaining salons retain it somewhere between 90 and 95%.
So when you’re looking at the best, the epitome, the can’t be any better salons, they’re losing 5 to 10% of their clients every single year.
The best.
So when somebody says to me, we’ve lost no clients, well then you just don’t have good record keeping.
So are we living under the assumption of we didn’t lose any clients because of this policy?
And then if that’s true, how do you know that?
So as I say that, please don’t take that as, oh, see, she doesn’t want us to charge the fee.
That’s not what I’m saying.
What I’m saying is whenever anybody hears from anybody, oh, I’ve done this and I’ve lost no clients, it’s immediately not true.
I lose clients every year.
You lose clients every year.
That’s just business.
Every business loses clients every year.
And generally speaking, we don’t have really solid data on why the vast majority of our clients walk away.
So I just want to add that for context.
I’m certain that the owners who are charging these fees are happy about it because money in your pocket is great.
What I want to explore is if it’s a good strategy long-term, if there are other strategies that are better and is this legal?
And those are kind of the questions I want to come to the table with today, and then you can make an informed decision based on that.
Sounds fair.
Okay, so first of all, if you’ve ever heard me talk about passing on the surcharge of credit card processing fees to clients in the past, I’ve always been adamantly opposed.
And one of the things I said for many years is it’s actually illegal because it used to be.
So the practice of surcharging was outlawed forever.
And then in 2013, there was a class action lawsuit that permitted merchants in several states to implement surcharges in their business.
Now, that wasn’t a federal law at the time, but it’s been expanded.
So because of that 2013 lawsuit, there was a chain reaction, and lots of states have adopted a pro-surcharging stance, but not all of them.
And so this, I think, like anything else, is trending, for sure.
Like a trending topic.
It’s one of those random things that’s like, oh, everybody’s doing it.
Well, everybody can’t possibly legally be doing it, but I think it’s one of those things where, as small business owners, we’re always looking to keep a bigger piece of our own pie.
And if this is an opportunity for us, maybe it makes sense.
So let’s just look at it from a legal standpoint and then we can dig in a little deeper.
So the states in which it is illegal to pass on credit card processing fees to clients, we have Connecticut, Maine, Massachusetts, Oklahoma and Puerto Rico.
Then we have several states that are regulated.
So Texas is one in particular that falls into a gray area.
There is some legal stuff that is happening at the time of this recording, so it’s going to sway one way or another, maybe sometime in 2025, maybe sometime in 2026.
I don’t know, but there is a question about if Texas is going to allow this to happen legally or not.
I’m going to assume at this point, you still can because it’s in the gray, but keep an eye on it because we don’t know what’s going to happen forward.
In New York, New Jersey, Nevada, and South Dakota, passing on surcharges and credit card processing fees cannot exceed the merchant’s cost, which I don’t think that’s a major issue.
I think for most of us, it’s like, if we’re paying a 2.9% credit card processing fee, that’s what we’re looking to pass along to our clients.
So what it’s saying is, you can’t surcharge more than what you are paying to your processor.
But I think that’s what most of us are looking for anyway.
So it’s just kind of like a clarifier on that one.
Then we have Illinois.
Surcharge rates are capped at 1% of the total processing fee, meaning if your credit card processor charges you 3.3% per swipe, you can still only pass on 1% to your clients.
So it’s almost like a share responsibility.
I thought that was kind of interesting.
They’re the only state that really does it that specific way.
Colorado is a 2% cap.
Montana is a 3% cap.
So the reasons why the caps matter is that there are also caps that come from the credit card providers themselves.
So Visa only allows for a 3% of the total transaction surcharge to be passed along to the customer.
With MasterCard, it’s up to 4%.
So that’s something to keep in mind, too, is it’s not cut and dry across the board, even with the credit card processors.
I don’t think most of us are looking to surcharge above 4% anyway, but if you’re processing a Visa, if your swipe is costing you 3.3%, you can’t legally charge more than 3.
So that’s just something to keep in mind as well.
Okay, let’s go back to the states for a minute.
So Kansas and California both have something relatively similar going on.
So in Kansas, it’s stated that if a merchant is to implement a credit card surcharge program, they must incorporate credit card fees into the listed price of products.
So it can’t be a secondary charge.
It’s just like if your tint was once $100 and you want to recoup that 3%, it’s now going to be $103.
So you can’t say, oh, part of that is a credit card surcharge.
It’s just you need to raise your prices, which for me has always been my stance.
I’ve always said if you’re worried about credit card processing fees, you need to look at your overall business operations costs and look at your budget and ask yourself, do we need to raise our prices?
Is there enough margin here?
It’s just part of a bigger conversation, in my opinion.
And that’s kind of where Texas law stands.
In California, July 1st, 2024, SB 478 passed.
And it’s very similar.
It says, including credit card surcharges, the advertised price of goods and services must include any mandatory fees or surcharges.
So again, very similar to Kansas.
If you’re charging 3%, that has to be what’s on your website.
That has to be what you quote to a client, all that kind of stuff.
It says, while businesses can still factor credit card processing fees into their prices, they cannot present it as a separate fee at the point of sale.
Again, it’s just going back to budgeting and business practice and looking at your profit margin more than anything.
Georgia, convenience or swipe fees are allowed in the state, but businesses must provide customers with alternative payment options.
So kind of old school, but one of the things we’re definitely going to dig into today, you can say there’s a 3% credit card processing fee, but you must also accept cash or you must also accept check.
There’s some businesses I was in one over the weekend, that was credit card only.
It is a very, very, very popular high production bakery.
Like they probably serve a thousand customers an hour.
I mean, really high production and their credit card only.
So if they were in Georgia, could not do processing fees because there is no cash option, so there has to be an alternative in the state of Georgia.
In Michigan, credit card surcharging is legal.
However, brick and mortar stores, which salons fall into, have to install signage at every point of sale and entrances of the business that explain in detail the surcharge fees to the customers.
In the case of gas stations, if prices differ for cash versus card, they must use similar signs to post these prices.
So if in Michigan you’re going to do this, you have to have a sign at your door and at every point of sale, that detail how your surcharges work.
Now that is simply current as of July 21st, 2025.
You should do your research on your own and see what is legal in your state, because this seems to be something that is evolving very much in real time.
This was actually an episode that was relatively difficult to research because there are very clearly moving parts and pieces and laws that are being passed, like as we speak and debates and lawsuits and all kinds of things.
So just know you are entering muddy water with this topic, no matter what you decide to do.
So no matter what state you live in, if you’re going to do surcharging and you live in a state where it is potentially legal, a few things you have to do.
Disclosure is required legally in every state.
If you can do this, there is not a single state that says you can do it and you don’t have to disclose it.
You’re always going to have to disclose it.
Businesses must clearly and conspicuously inform consumers about the surcharge before the transaction is completed, both online and in store.
The surcharge should be listed as a separate line item on the receipt.
Now, the caveat to that would be a state like Kansas or California, where you have just included that surcharge in your cost of doing business, which is going to be my preference.
Like if you’re sweating the credit card processing fees, you probably just need to raise your prices.
It’s six of one half dozen of the other, honestly.
But they’re saying if you are going to have it be a surcharge, it has to be lined itemed.
No profit, meaning the surcharge can’t be something that’s profitable on the flip side.
This is where it gets tricky.
In all states, surcharges can not be applied to debit card transactions.
So if you decide you’re going to do this, you have to ask your clients every time, are you using a debit card today?
And if they’re using a debit card, it’s essentially an electronic form of payment that is same as cash.
So you can’t charge that processing fee if you’re swiping debit cards.
You’re gonna have to cross check every single time what you’re swiping and see if that fee is even appropriate for that transaction.
Now call to action here, because if you are going to implement these surcharges or processing fees, you do have to notify your acquirer or your payment processor.
So if you use Square or whatever you’re using to process those credit card payments, you have to let that company know.
You also have to notify Visa, MasterCard, and let the credit card companies know, and your acquirer or your payment processor know, at least 30 days ahead of charging your first surcharge.
So I looked up Visa’s, and if you go to visa.com/merchantsurcharging, you can start the paperwork there.
For a MasterCard, they didn’t have a clean URL, but if you just search MasterCard surcharge form, it comes right up, it took two seconds.
And then whatever credit card processor you use, they’re going to have their process as well.
So all of that needs to be completed and documented 30 days ahead of you implementing any surcharges if you do choose to do so.
So you can’t just crank it up by 3%.
You have to follow the process.
And then you’re going to be agreeing to having receipts available for your clients that break down the way that the processing was done and how much was based on service and how much was based on surcharge and that you’re going to have the signage up and whatever laws are required in your state, you’ll be agreeing to those things and then letting everybody know that you’re doing it.
So this is being very well documented.
So then the question becomes, when the person who submitted this question said, I’ve talked to other owners, everybody loves it, clients don’t say anything, nobody cares.
I was like, okay, well, let me look at what the data supports.
So there was a survey done by a company called Wallet Hub and 87% of people think they’re being nickel and dimed when they’re asked to pay an extra fee for credit card payment processing.
More than four and five Americans have been charged a fee when paying with credit card.
I mean, we’ve all basically been impacted by this one way or another, right?
Two and three Americans say they would not use their credit card if they were charged a fee for doing so, which take that how you want to, because maybe you’ll get more debit card transactions or more cash transactions and maybe that’s really what you’re after anyway.
More than three and five people believe it’s unfair for merchants to pass their payment processing fees on to their customers.
The last piece that I thought was interesting is that 58% of people say that they don’t believe merchants are transparent in the way that fees are being processed and advertised.
So here’s the thing about all of that data.
I don’t know about you.
When I go to swipe my credit card and there is a processing fee, it annoys me every time.
I’m like, that’s annoying.
When there’s fees anywhere I go, I feel like that’s annoying.
Does it change where I spend my money?
I can’t say that it does.
I can’t say that I would go to a convenience store and they charge me a transaction fee.
And then I’m like, well, I’m never going there again.
I’m annoyed by it.
I don’t love it.
Now, when I’m experiencing these fees, first of all, I live in California, right?
So I’m having a totally different experience than somebody in a state where these are legally accessible in a way that I’m not having here.
I only see these kind of fees when I’m outside of my own state, because in my state, you can’t do this.
But if I was traveling and I were to come across this, it does it irritates me.
I don’t love it.
If I was to be going to a service provider who was always doing this.
And let’s say I was spending a thousand dollars a year with this person.
So I knew that I was having to pay an extra.
What does that end up being?
Thirty bucks to see this person.
Does that make me less loyal to them?
No, probably not.
But it does make me feel a type of way.
So do with that what you want to.
I want you to think about your clientele.
Are they going to love it?
No, probably not.
Is it going to make them leave you?
I don’t know.
I think it’s different for every kind of client and their tolerance for stuff like that.
I think the most recent kind of feedback we’ve seen on this type of transaction is the push back against constantly being asked to tip.
When you order a coffee at Starbucks, you’re asked to tip.
I mean, you go anywhere.
You go to sometimes a convenience store and you’re asked to leave a gratuity.
We’re so in this mindset of every time you swipe a card, you’re asked to leave a gratuity.
I do think that there is a consumer irritation around that.
Is there going to be an increased consumer irritation around credit card processing fees?
There might.
Will there be pushback?
Maybe.
Will somebody say, okay, yeah, sure, I’ll pay your 3% credit card transaction fee, but now your tip has gone down to 17%.
Maybe they will.
I don’t know.
I think the answer will be different for everybody.
I don’t think it’ll be that broad.
I want to be really respectful when I share this story because it was shared with me in confidence.
I had a really interesting conversation with a stylist who decided to include gratuity in her service charges many years ago, did the thing where she eliminated gratuity but raised her prices in order to do so.
And she told me in confidence, it was a huge mistake and she did it because she felt like everybody was doing it.
And now it’s very difficult to undo because she’s made this huge statement about it and it’s how she’s known and how she’s seen.
And now you have to undo it all.
So if you decide to do this, you just have to decide you’re going to go all in, you’re going to do the signage, you’re going to do the legal courses of action, you’re going to stay up to date on the policies and what’s going on with your state.
And like, do you want to get into all this?
Because it’s not a light decision.
I think when you’re looking at it at a glance, it’s easy to be like, oh yeah, 3% have the clients cover it.
It’s not so simple.
So just really make sure if you want to do this, you really want to go for it.
Something else to consider if you are going to do this kind of surcharge is to offer cash discounting either in addition or instead.
This was something that came up suggested in the research I did, and I loved the point of view.
So if I was given the option to pay $103 for something on my card or $100 cash, if I had the 100 in cash, I might just give it to you.
I might not have it.
So you might have to take the 103 and that’s just the way it goes.
But I think that if you position this as not necessarily a credit card surcharge, but a cash discount and do a reframe, it might land a little bit better and you’ll still get a similar end result.
Do you know what I mean?
So if right now you’re charging your average tickets, $100, let’s say you do raise your prices by 3% across the board, like you’d have to do in California and Kansas if you wanted to implement something like this.
And the cost of your services just goes up by 3%.
Now, I cannot say at scale that I recommend the strategy.
I think that price increases are done really differently, and we’ll talk about that on next week’s episode.
But let’s say you decide you want to do that.
What you could do is at the same time, you implement that 3% increase in your service cost, you could say, or you could pay cash and your price doesn’t go up.
It’s interesting.
I feel mixed about it because you’re almost discounting yourself before the raise even happens, right?
Because let’s say 30% of your clients decide to pay cash now.
Cool.
They’re paying cash, but they’re also paying less.
So only 70% of your clients are really part of the price increase.
I don’t know.
I don’t know.
I feel like over time, it would probably be something that would shake out well.
I think the immediate impact could be a little bit messy.
I don’t think you’d actually make more revenue in the short term.
I think long term, it might be able to pay out potentially.
I don’t know.
I haven’t mathed it.
And it would depend on what portion of your clients choose to go the cash route and whatever.
And then, so let’s say you’re getting cash.
Are you claiming the cash?
I’m a big proponent of having as much of your income be on paper as possible as somebody who really is looking to have financial peace of mind and I’m looking into wealth creation all the time.
You can’t do wealth creation with cash under the table.
Like it’s just not possible when you look at investing and having your money work for you, that’s all gonna be very traceable transactions.
And so if you’re taking the cash, but you’re taking less of it, you’re avoiding the credit card transaction fees, but my hope is that you’re still claiming it as taxable income.
Just really think about systematically, do you want to be doing frequent deposits to your bank because of that cash?
If you are gonna become more of a cash heavy business, I saw a stat recently with something like less than 20% of transactions are done by cash today in current times.
Are you okay increasing that?
Are you okay doing deposits at the local bank every other day?
It’s really thinking about your lifestyle, what works for you in your business, how much you want to take on, how much this matters to you.
For me, my stance hasn’t changed.
It’s been what it’s always been.
And instead of worrying about the 3% credit card transaction fee, for me, the game I like to play is how do we increase your revenue by 10% this year so it’s a non-factor.
I just think it’s better for the clients, better for you.
I think it’s more fun.
I think it’s less paperwork.
I think it’s more effective.
I think it’s more scalable.
That’s my take.
You have options.
Think about you, your business and what you want to be up to.
So much love, happy business building and I’ll see you on the next one.
