A merchant sued Visa and MasterCard for the unfairness of taking on the credit card processing fees. They won with some qualifications. They can’t pass fees back to consumers for debit cards, only credit cards. As a result, many processors have programs to automatically add a surcharge fee onto a credit card transaction. But the merchants are getting pushback from consumers. Here is a discussion of other ways to skin the cat.

1. Merchants can also consider a cash discounting program, giving consumers a discount for paying with cash. In fact, cash discounts are becoming more popular as merchants seek to lower payment and card acceptance costs. Critics say that cash discounts are just surcharges in disguise, (why yes, yes they are), while proponents say there is nothing inherently wrong with cash discounts, or surcharges for that matter, but merchants must abide by the regulations governing their use. And we agree with that too.
2. Merchants should simply raise their own prices, say 4%. Merchants for years have adapted to the extra fees for card processing by raising their prices. And if your customers are happy with your services and products, plus they like you, they will happily pay the extra 4%. Remember, you deserve a raise just like everyone else.
3. Add a rewards program for customers along with the surcharge to let them think they are still getting deals from you. Men’s Warehouse constantly runs ads for buy one suit, and get the second one for free. This is just semantics. The price is jacked up twice as high on the first suit to make you think you are getting one for free.
4. Some auto repair shops pass along the credit card fees by adding a ‘disposal fee’ for environmentally disposing of old mufflers, batteries, etc. In other words, raise your prices but call it something else.

Consumers who are buying small ticket items hardly notice the increase of the added 4% surcharge, says one of our fast food restaurant merchants. Only a very few mention their complaint. All the others just sign the receipt and grab their food. So they added 4%, but lost only .4% in their margins.

Here’s a quick guide to surcharging and cash-discount rules from Digital Transactions – Trends in the Electronic Exchange of Value – a publication serving the informational and analytical needs of markets undergoing fundamental transformation brought on by shifts in technology and consumer behavior.

• Surcharges can be applied only to credit card transactions, but discounts for cash can be offered on would-be credit and debit card sales.
• Cash discounts are legal in all 50 states.
• Credit card surcharging is now legal in 43 states and may soon become legal in New York, depending on the outcome of an appeal.
• Surcharges are limited to the lower of 4% of the sale or the merchant’s processing costs.
• Merchants wishing to surcharge must give 30 days’ notice to their acquirer and the card brands.
• A surcharge notice must be placed by the merchant’s front door, at checkout counters, and on receipts.

Call Electronic Money Company at 505-296-2847 to answer any questions you may have as you consider a surcharging, rewards, or cash-discount program.