Credit Card Processing: Legally Beat the System and Reduce your Costs
Are you tired of paying ever-increasing fees for the "privilege" of accepting credit cards in your business? Some merchants have taken the approach of imposing surcharges on credit card transactions. If you are one of these merchants, let me caution you: IT IS ILLEGAL, and will lead to problems for you so don't do it. The secret to beating the credit card processing fees is not charging more for credit card sales, but instead, charging less for cash sales. It may sound like the same thing, but there is a big difference.
The increasing costs associated with accepting credit cards are leaving many merchants searching for ways to pass along at least a portion of processing expenses to their customers. VISA and MasterCard are becoming aware of this new trend and are enforcing strict regulations specifically designed to hinder any such efforts by merchants. With the tightening economy and customers spending less, discount fees, transaction costs, and other expenses associated with the acceptance of credit and debit cards are eating away at businesses net profits.
If you're like most businesses, you have seen an increase in the use of plastic over just a year ago. The reason is simply that there is an increase of "rewards" type cards that are in use today. As a consumer, when you're out shopping and you have the option of paying with cash or check because you have the money available today, or using a "reward" card, which would you chose? Most often, the shopper would likely chose the latter for the benefit it provides. As a result, you see reduced profits and, in fact, pay more for accepting this "reward" card than you would for a generic credit or debit card. So, what can you do?
One thing you can, and should do, is get a thorough understanding of your credit card processing rates and terms. Have an independent rep give you a total consultative analysis of your curreent processing program (check out this site). You should absolutely be well educated in this ever increasing cost center of your business. The next thing you could do is consider a pricing structure for your goods that would offer a "discount for cash". This alternative, of course, is much preferred over imposing surcharges for credit transactions since it is ILLEGAL.
Keep in mind, it's not likely that the V/MC "police" would walk thru your door and penalize you for "surcharging". However, the risks to your business in doing so, is huge. If discovered, your merchant account could, and likely would, be terminated. And, your name and business name could be put on the MATCH OR TMF (Terminated Merchant File) making it nearly impossible to acquire another merchant account in the future.
The largest card originator (VISA) has even published information stating that, "You may, however, offer a discount for cash transactions, provided that the offer is clearly disclosed to customers and the cash price is presented as a discount from the standard price charged for all other forms of payment". While you can’t charge extra for credit card sales, you can charge less for cash as long as all prices are clearly stated to customers, and the cash price is reflected as a discount from the original purchase price. For example: if the price tag on an item states that the item costs $10, the cash price must be represented as a discount from that price. The price tag for this particular item should look something like this:
Price: $10.00
5% discount for cash payment
5% Discount for Check Payment
By utilizing a tiered pricing model, merchants can alleviate the cost of accepting credit cards, while still providing their customers with the freedom to choose their preferred method of payment.
I hope this information has proved beneficial to you and the future continued success and profitability of your business. Please tell your friends about this blog and my website .
Published by VISA in the Card Acceptance and Chargeback Management Guide for VISA Merchants, ©2004
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