Surcharging in Heavy Industry: The B2B Standard

Key Takeaways for CFOs & Controllers:

• The Cost of Scale: On a $20,000 invoice, a standard 3.5% fee is $700. For low-margin distributors, this can erase the entire profit of the sale.

• B2B Norms: Unlike retail, B2B buyers (procurement officers) are desensitized to surcharges and often view them as a standard line item.

• Level 3 Alternative: If you cannot surcharge, passing "Level 3 Data" (PO numbers, tax ID) can lower your interchange rate by ~1% without the customer knowing.

• The Hybrid Approach: The most sophisticated heavy industry businesses use a "Surcharge on Credit / Free on ACH" model to steer behavior.

In heavy industry—manufacturing, HVAC supply, construction, and wholesale—margins are made on volume, not markup. When you move $100,000 in steel or lumber, a 1% variance in cost is massive.

Yet, many B2B businesses in New York and Florida still accept "Purchasing Cards" and "Corporate Cards" at retail rates, losing 3% to 4% on every swipe. In 2025, absorbing these fees is no longer a sustainable business strategy.

This is the Circle Processing guide to structural cost reduction for the B2B sector.

The Math: Why B2B Surcharging is Essential

Corporate credit cards (like the Amex Plum or Visa Signature Business) carry the highest interchange rates in the ecosystem because they offer massive rewards to the cardholder.

• Scenario: You sell $50,000 of equipment.

• The Fee: You pay ~$1,750 in processing fees.

• The Reality: That $1,750 was your shipping budget, or your commission, or your bottom line.

By implementing a compliant Surcharge Program, you pass that 3% ($1,500) back to the client. Most corporate buyers do not blink at this; they are spending company money, and they prioritize the float/rewards of the card over the fee.

The "Level 3" Optimization: The Hidden Savings

Sometimes, you cannot surcharge. Maybe you have a contract with a government entity or a large distributor that forbids added fees.

This is where Level 3 Processing comes in.

Visa and Mastercard offer lower rates to merchants who provide detailed data about the transaction (simulating a digital invoice).

• Level 1 Data: Card Number, Amount, Date (Standard Rate: ~2.9%)

• Level 3 Data: PO Number, Tax ID, Unit of Measure, Freight Amount, Commodity Code. (Optimized Rate: ~1.8% - 2.2%)

Circle Processing’s Virtual Terminals can automatically populate this data for you. We act as a "data bridge," ensuring you qualify for the lowest possible interchange rate on every corporate card you run.

Implementation: The "Surcharge or ACH" Workflow

The goal of B2B payments isn't just to collect money; it's to steer behavior. We recommend the following workflow for our industrial clients:

1. The Digital Invoice: Send an invoice via the Circle/Clover Virtual Terminal.

2. The Choice: The client clicks "Pay." They are presented with two options:

   • Option A: Pay by Credit Card (3% Fee added automatically).

   • Option B: Pay by ACH / eCheck ($0 Fee).

3. The Result: You win either way. You either get the convenience of the card without the cost, or you get the cash via ACH.

Compliance in B2B

Even in B2B, rules apply.

• The Cap: You cannot surcharge more than your cost of acceptance or 3% (whichever is lower).

• The Debit Rule: You cannot surcharge a business debit card.

• Contract Review: Ensure your Master Service Agreements (MSAs) with clients allow for fee-passing.

Conclusion: Protect Your Margins

In heavy industry, you negotiate every cent of your raw materials. Why stop negotiating when it comes to your merchant fees?

Circle Processing specializes in high-volume B2B accounts. Whether through Surcharging or Level 3 Optimization, we ensure you keep the money you earned.

FAQ: B2B Surcharging

Q: Can I surcharge government purchasing cards? A: It depends on the state and the specific contract. However, government cards are prime candidates for Level 3 Processing, which can lower your fees significantly without adding a surcharge.

Q: Will corporate clients refuse to pay the fee? A: Some might. In that case, having the ACH option is critical. It removes their objection by giving them a "free" way to pay.

Q: How do I get Level 3 rates? A: You need a specialized Virtual Terminal or Gateway that supports enhanced data fields. Standard countertop terminals typically cannot pass Level 3 data.