Cash Discounts and Surcharging Programs Move into eCommerce
Like everything else in our technological world, payment trends are progressing from retails spaces and into the eCommerce sector – particularly cash discount and surcharging programs, which gained some real traction due to smaller margins and lower fees and rates on credit card payment transactions.
A 2013 ruling against the card networks resulted in retail and eCommerce merchants to be able to implement surcharging programs in all but 10 states including California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas, plus the U.S. territory of Puerto Rico.
Here are the cliffs notes version of what a cash discount or surcharging program looks like:
- Credit card payment processing are only applicable to the surcharging program – no debit cards
- Signage has to be posted and visible to customers before implementing a surcharge to a credit card
- A 4 percent maximum could be imposed
- Surcharging programs are only allowed in the states where it has not been excluded [see the list above].
While both the cash discount and surcharging programs pricing plans each have their share of critics, discounts for paying cash happen to be especially controversial since Visa issued a bulletin last October that essentially told the merchant-acquiring community that cash discount programs weren't as relevant to the credit card payment processing industry surcharging programs rely solely on credit card using clients. Because of this, many eCommerce merchants are looking specifically at the surcharing program model for their businesses in an effort to offset some of the [otherwise] lofty payment processing fees and rates.
Some have even come to call cash discounts "among the most misunderstood programs" for retailers, which, in part stems from a lack of network rules for cash discounts programs compared to surcharging programs where the main key requirement is that only credit card sales can be implemented with surcharging programs [hence the sudden influx of eCommerce businesses].
Some payment processing companies predict the regulations will become more strict regarding cash discounts programs shortly, and for these reasons, tend to favor surcharging programs particularly for eCommerce businesses.
Surcharging programs could be in for even more expansion, as we've recently seen surcharging program bans in California, Texas, and Florida have fallen off, and New York's ban, although still on the books, has been heavily circumscribed as a result of a Supreme Court ruling.
These four big states account for 40 percent of the U.S. population, and only six states still have bans against surcharging programs which means that this valuable tool for eCommerce businesses will only continue to grow.
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Kyle Hall is a fintech entrepreneur, software engineer, and marketing strategist with over a decade of experience in high-risk payment processing and SaaS development. He is the CEO of PayKings, a lea...
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