Question 1

What is a gross-up calculation for credit card fees?

Accepted Answer

A gross-up calculation determines the total amount to charge a customer so that after the credit card company deducts its processing fees (and any VAT on those fees), you receive exactly the original invoice amount. You can't simply add the fee percentage on top because the CC company also charges fees on the surcharge itself.

Question 2

What is the gross-up formula for credit card fees?

Accepted Answer

The formula is: Amount to charge = (Invoice + Flat fee) ÷ (1 − Effective rate), where Effective rate = CC processing fee % × (1 + VAT on fee %). For example, with a 3% processing fee and 7% VAT on the fee, the effective rate is 3% × 1.07 = 3.21%, so you divide your invoice by 0.9679.

Question 3

Why can't I just add the credit card fee percentage on top of my invoice?

Accepted Answer

Because the credit card company charges its percentage fee on the entire amount charged — including the surcharge you added. This creates a circular problem where you always end up short. The gross-up formula solves this by working backwards from the net amount you need to receive.