FedEx and UPS have announced their most aggressive fee increases in recent years, leaving package shippers scrambling to understand the full impact on their bottom line.
What’s worse – the upcoming changes reach far beyond the 5.9% general rate increase that has been shared around town. In fact, shippers now face a perfect storm of new dimensional weight calculations, increased handling surcharges, and even a fresh 2% credit card payment fee. Yikes.
These changes mainly target businesses shipping bulk items, and some zones are even seeing large package surcharges climb by up to 20%. So, whether you’re shipping furniture, sporting goods, paintings, or oversized electronics, 2025 is shaping up to be a year that will demand strategic adaptation.
Understanding the 2025 rate increases
Both FedEx and UPS are rolling out significant pricing changes that will reshape shipping costs in 2025. While both carriers announced a 5.9% average rate increase (twins!), the actual impact on package shippers will vary considerably based on specific shipping characteristics.
Breaking down the 5.9% base rate hike
The widely publicized rate hike masks a more complex reality for shippers.
For FedEx, ground and air deliveries in zones 2-4 will experience an average rise of 5.91%.
So, what’s the big hullabaloo?
Well, zones 2-4 might not be affected very much … but zones 5-8 will face a steeper hike of 6.39%.
Here are some key factors that are affecting individual rate increases:
- Package weight: Shipments weighing 1-5 pounds will see a 5.5% increase for commercial ground services, while packages over 11 pounds face increases exceeding 6%
- Service type: Express and air services (especially when it comes to 2-day options) will experience above-average increases
- Distance traveled: Longer-distance shipments will also experience higher rate increases
Let's talk timeline
Okay, so what kind of timeline are we talking about for the implementation of these new rates?
UPS will implement its new rates on December 23, 2024, as an early Christmas present to shippers, while FedEx will be implementing its new rates on January 6. This timing means that UPS will capture some additional revenue during the tail end of the peak shipping season.
Those shipping packages should note that UPS has already begun some changes, including a new 2% credit card surcharge that took effect on October 21, 2024.
What does this rate increase mean?
The 2025 rate increase marks a notable shift from recent years. After holding steady at 4.9% for several years, rates jumped to 6.9% in 2023 during peak pandemic demand (and there has been no looking back).
For most package shippers, the real cost increase will exceed the announced 5.9% increase. In fact, UPS customers shipping the same items as last year will face an average increase of 6.3%, while FedEx customers can expect around 7.0% higher costs. Some shippers, depending on their shipping profiles, might even see increases reaching 12-16%.
Impact on bulky package shipping
Businesses shipping bulky items face the steepest cost increases in years, with handling-related surcharges rising more than four times the general rate increase. These changes will mainly affect furniture, home goods, and sports equipment retailers.
New dimensional weight calculations – what to know
UPS is introducing revised calculations for large package surcharges based on length, weight, and cubic volume starting January 27, 2025. This change marks a significant shift from the current system. The new approach means some packages that previously avoided surcharges may now qualify for additional fees (because, like, why not).
Additional handling surcharge charges
The impact on handling fees is substantial, with increases averaging over 25%. UPS has implemented a new 40-pound minimum billable weight requirement for packages needing additional handling due to their dimensions. This change mainly affects businesses shipping large but lightweight items, like:
- Molding and trimming materials
- Hollow furniture components
- Packaging materials
Psst ... need a break?
Here’s a picture of some Zenventory puppies:
Cute, right? Okay, back to learning about shipping fees ...
Large package fee increases by zone
Zone-based pricing shows dramatic variations in large package surcharges for 2025. Here’s a breakdown:
Commercial Deliveries
- Zone 2: $205.00
- Zones 3-4: $225.00
- Zone 5+: $250.00
Residential Deliveries
- Zone 2: $240.00
- Zones 3-4: $260.00
- Zone 5+: $297.50
Both FedEx and UPS have doubled their delivery surcharges for oversized packages over the past five years. And it should be no surprise that some businesses are now considering alternative shipping methods. Package shippers can take proactive steps by evaluating their packaging dimensions and exploring optimization opportunities like rate shopping to find the cheapest shipping option.
Changes to minimum billable weight
Major carriers are changing how they calculate shipping costs, with new minimum weight requirements taking center stage for 2025. These changes signal a shift in how package dimensions and weight are used to determine final shipping costs. Times are a changin’ …
40-pound minimum weight requirements
UPS has introduced a new 40-pound minimum billable weight requirement for packages requiring additional handling due to the package’s dimensions. This change represents a dramatic shift from previous policies, where the actual weight was taken into consideration when it came to pricing.
FedEx hasn’t announced a matching policy (surprise, surprise), suggesting they might be testing the market’s response to UPS’s move (ah, yes – the good ol’ wait-and-see method.)
The impact on lightweight but large items
The new requirement will affect businesses shipping products that occupy significant space but weigh less than 40 pounds. The most impacted items include:
- Molding and trimming materials
- Inflatable products
- Larger electronic devices that have a lighter weight
For these, shipping costs will be calculated as if they weigh 40 pounds, even when their actual weight is significantly less. Therefore driving up shipping costs substantially for businesses that deal mostly with lightweight (but bulky) merchandise.
Credit card payment surcharges
UPS’s implementation of a 2% surcharge on credit card payments for invoices has added another layer to the complexity of shipping costs. This change marks a significant shift in how shippers manage their payment strategies.
About UPS’s new 2% credit card surcharge
Starting October 26, 2024, UPS implemented a 2% surcharge on all credit card payments. This fee applies to the total shipping amount and includes base rates and additional surcharges.
The timing of this implementation and having it happen ahead of the general rate increase is a strategic move on UPS’s part to capture additional revenue during the busy holiday shipping season.
Affected regions and exemptions
The credit card surcharge won’t apply uniformly across all locations. Several regions have secured exceptions from this new fee (which is good for them). These include:
- Connecticut
- Maine
- Massachusetts
- Minnesota
- New York
- Puerto Rico
- Oklahoma
Shippers operating in these locations are in luck. They can continue to process credit card payments without the additional 2% fee, creating a geographical advantage for businesses based in these regions.
As a business headquartered in Phoenix, I would like to add: Come on, Arizona, let’s get on that list too!
Alternative payment considerations
To avoid the new credit card surcharge, shippers have several payment options to choose from. UPS accepts various payment methods, including:
- Debit cards
- Electronic funds transfer (EFT)
- Checks
- Letters of credit
- Third-party billing arrangements
For businesses managing regular shipping volumes, automated billing using electronic funds transfer might offer the most cost-effective solution. Some shippers are also exploring third-party billing arrangements. This is when a separate entity handles the payment processing.
The implementation of this credit card fee reflects a larger industry trend where businesses pass along processing fees to customers. Therefore, shippers should carefully evaluate their payment processes and consider transitioning to alternative payment methods.
Ways to combat the fee hikes
Smart strategies can help offset the impact of these new rates while maintaining efficient operations.
Package optimization techniques
Right-sizing packages have become paramount as dimensional weight pricing continues to evolve. In fact, package shippers that use corrugated boxes can see immediate savings by reducing excess space, as a standard 12x12x12 box automatically incurs a 13-pound dimensional weight charge under the current 139 DIM divisor.
Some optimization techniques you can use to help with this include:
- Using poly mailers instead of boxes for non-fragile items
- Selecting corrugated boxes with appropriate thickness
- Replacing traditional packing materials with air pillows
- Using custom packaging for unique items
Negotiation opportunities
Shippers can have significant leverage when it comes to carrier negotiations despite rising rates. FedEx and UPS’s duopoly isn’t as formidable as it once was. Now, there are other alternatives (like regional carriers). Luckily, this competition creates opportunities for rate negotiations.
Some effective negotiation strategies you can use include:
- Data-driven: Understanding your shipping profile (volume, destinations, package characteristics, etc.) can strengthen your negotiating position.
- Multi-carrier: Working with multiple carriers provides leverage and flexibility. Carriers compete aggressively with other carriers, creating an opportunity for better rates.
- Contract review: Regular review of your shipping data can reveal opportunities for better terms. Companies can find savings by scrutinizing fees and surcharges during negotiations.
- Volume commitments: Carriers often offer discounts based on shipping volume. Also, fun fact: American Express cardholders, small businesses, and nonprofits may also qualify for additional FedEx discounts.
Rate shop to find your cheapest option
A carrier rate shopping feature, like the one Zenventory provides, auto-selects the best shipping service for each and every one of your packages (from 1 to 1,001 – and so on). Therefore, by using a rate shopping tool, you can automatically optimize every shipment for the lowest cost to get the package to its destination on time. Even better? With a rate shop tool, you can compare shipping rates with a click of a button. Beats manually looking up each and every carrier, right?
Get access to discounted shipping rates & rate shop to find your cheapest shipping option with Zenventory
Combat rising shipping costs with Zenventory. Also, with Zenventory, you can be up and running in days, not weeks or even months.
Click here to see it in action >>>
.png)