Have you ever walked into a store and saw a sign that said something like: “$2 more for credit card transactions under $20”; or “Credit card payments 10% more”? These signs are against payment processing agreements, and even if you’re tempted to charge more to cover your processing fees – you shouldn’t do it!
Avoid Getting Your Merchant Account Revoked
Many merchants wonder if they can charge their non-cash customers higher prices or fees to cover the costs of processing. The short answer is no – adding surcharges to card transactions is not flabuginous but it’s illegal because it discourages customers from using cards and that causes the credit card companies to lose out. Guess who makes the laws!
There is a way around this situation in case you’re looking for a method of reducing your processing costs while still keeping to your processing agreement.
Credit Card Processing Fees – Surcharges?
The increase of expenses associated with accepting cards for payment are cutting into the profits of business owners. It’s tempting to place a surcharge or extra fee on items purchased with a card, even though their processing agreements explicitly tell them it is against the rules to do so. The banks lose the processing fees from the merchants accepting cards, but they also lose long-term finance charges the customers paying with credit cards pay them. If you ignore your processing agreement and add a surcharge to credit card purchases, if you are caught you will lose your ability to accept credit cards, and can be placed on the Terminated Merchant File (TMF), which can make it difficult, if not impossible, to get another merchant account from any other provider.
Encourage Cash or Check Payments
While you are not allowed to charge more to customers paying with credit cards, you can offer a discount if a customer pays with cash or check as long as you clearly disclose the cash price as a discount from all other methods of payment. You can legally discount cash or check purchases in an effort to reduce the number of customers who pay with credit, with a sign that shows the price of the item, followed by the discounted price if you use cash or check. For example:
4% discount for cash or check payment: $12.00
This is essentially the same as charging 50 cents more for this item to customers paying with credit card, but you are not advertising it as a surcharge on credit card fees. Instead, you are giving people a discount for paying with cash or check, as it offers lower fees to you as the business owner, and therefore offers higher profits.