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Merchants are going to be fined if they get caught by Visa for adding a custom fee at the terminal to cover credit card processing fees.
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Today, I want to talk to you about cash discounting and surcharging because Visa has come along and made some changes to this program. We used to have a program called zero cash processing. It was a way for merchants to pass on the fees from their merchant services onto their customers. And you added a 4% fee at the terminal and that covered all your costs, instead of just raising your prices, you could have this little custom fee. It’s been well adopted and now Visa decided they don’t like it.
In the old days, when we first started using credit cards, Visa and the other brands didn’t think it was right or fair for merchants to pass on the fees for somebody using a credit card. They wanted to be no fees because they wanted the entire populace to adopt digital payments. They didn’t want to penalize somebody for using their credit card. Visa thought that would hurt their whole business plan.
Then after a time, Visa and MasterCard decided there could be some surcharging in certain instances and you had to get approval, you had to fill out a form and get there permission to surcharge and it was generally allowed for businesses that had a convenient way to pay versus a regular way to pay.
The workaround was this this program we call zero cost processing or cash discounting, where a sign is put behind the counter of your store or office and the sign says all prices are cash prices and any other tender has a 4% fee and the fee is added on at the credit card terminal. It sure helps merchants cover some of their overheads and it was fairly well adopted, but Visa wants to put an end to it.
Visa wants to limit the surcharge to 3% and they also are taking away this request that you have to get permission from them. I don’t know why they’re wanting to change the rules, but they’re changing the rules.
The challenge for merchants with only being allowed to charge 3% are 2 folds:
- First, Visa doesn’t allow the surcharge on debit cards. So if you’re a restaurant or a retail with small tickets, you get a ton of debit cards. You can’t add the 3% on any of those cards. And the programing in the terminals is now required to reflect that rule. You don’t get to save your fees on those cards.
- Second, is with government cards and corporate cards, sometimes the costs for processing those cards is higher than 3%. So if you can add 3%, you’re not covering all of the fees.
Most people have a whole mixture. So some of your fees, maybe you can add the 3% to and some you can’t. But the program of covering all your fees is trying to be eliminated by Visa.
Now, what they’re planning to do is send out shoppers to find out if you’re cheating against these new rules from Visa and they can report you and find you starting at $1,000.
A lot of merchants are going to just not worry about it. Risk the thousand dollars and keep charging their 4% fee there. Cash discounting, zero cost processing program. They love it. The customers have adopted it. People are used to paying it and merchants for far too long have gotten the bad end of the stick when people want to pay with a credit card versus cash.
I’m Gingergaye, President of Electronic Money Company. If you have any questions, give us a call at 505-296-2847. or visit our Contact Us page. You can adopt the new program or we can talk about your types of transactions and help guide you through so you know what plan of action you can take. Hope you learn something. Talk to you on the next video.
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