How to Lower Processing Fees

How to Lower Processing Fees

Merchants seeking reliable payment processing for their eCommerce or retail businesses can explore programs to lower processing fees. Two such programs are the Merchant Account Cash Discount Program and Credit Card Surcharge Fee programs.

Defining Cash Discount and Surcharge Fee

Cash Discount

A cash discount is when you post only credit card prices and provide a discount on that price for customers who pay with cash.

Surcharge Fee

A surcharge is when you post traditional "cash money" prices and charge an additional fee for customers who pay with a credit card account.

Cash Payment Discount vs. Credit Card Surcharge

• In a cash discount scenario, a client pays less than the listed price.
• With surcharge fees, customers pay more than the listed price.

It's crucial to understand the difference, as it affects legality and compliance with Visa and MasterCard rules.

Visa Rules for Cash Discounts and Credit Card Surcharge Fees

Visa states that:

• The posted price must be for cards
• Merchants can provide a lower price for cash acceptance
• Cash discounts are permitted
• Merchants are not allowed to post a price for cash, then charge a higher price for cards

Importance of Visa's Rules

State laws where surcharges are prohibited

Surcharge prohibition on debit cards

States Where Credit Card Surcharging is Banned

As of 2018, credit card surcharging is prohibited by law in:

• Colorado
• Connecticut
• Florida
• Kansas
• Maine
• Massachusetts
• Oklahoma

Repercussions of Credit Card Surcharging

Consequences of non-compliance include:

• Merchant accounts being shut down
• Potential legal issues
• Negative customer reports to card brands

Implementing a Cash Discount Program

Considerations:

• List credit costs on shelves
• May be simple if prices already account for credit card costs
• Potential negative perception from customers

Credit Card Surcharge Programs

Challenges:

• Added fees at checkout may deter customers
• Cannot be added to debit card transactions
• Must comply with state laws and card brand regulations

Spotting a Credit Card Surcharge Program

Red flags:

• Mention of "non-cash adjustment" or "service fee" at checkout
• Listing "cash prices" and adding fees for non-cash payments
• Using terms like "customer service fee" to disguise surcharges

Best Practices

Partner with a processor that helps properly execute cash discount programs

Avoid processors offering surcharge fees under the "cash discount" name

Consult with payment companies, Visa/MasterCard, and potentially outside payments counsel

Ensure compliance with state laws and card brand regulations

By implementing these programs correctly, merchants can potentially see a significant boost in revenue while avoiding negative consequences.