The Merchant’s Guide to Credit Card Surcharges & Cash Discounts

10 Oct 2017

As the old saying goes, “You have to spend money to make money.” Nowhere is this truer than with credit card processing.

Much to the chagrin of retailers and other merchants, most credit card companies or merchant service providers charge a small fee for every credit card transaction. As cash declines in popularity and more customers opt to pay for their purchases with a card, many merchants are seeing their profit margins beginning to suffer.

That’s where credit card surcharges come into play.

What Are Credit Card Surcharges?

A credit card surcharge is a small additional fee that’s added onto a customer’s bill at checkout when they opt to pay with a card.

This isn’t meant to generate additional revenue for the merchant, but just to offset the cost of their credit card processing fees. Usually this won’t amount to much more than a few cents per transaction—between 1% and 3.5% of the total.

Aren’t Credit Card Surcharges Illegal?

Maybe—it depends on the state you’re in.

Nine states currently prohibit merchants from charging additional fees for credit card transactions:

  • Colorado
  • Connecticut
  • Florida
  • Kansas
  • Maine
  • Massachusetts
  • New York
  • Oklahoma
  • Texas

If you’re a merchant in any of these states, you’re not allowed to impose a credit card processing fee on your customers. But that doesn’t mean you can’t offset the cost of credit card processing.

Offering Cash Discounts vs. Imposing Surcharges

Even in states where credit card surcharges are prohibited by law, merchants can still offset the cost of credit card processing by encouraging customers to pay in cash with a “cash discount.”

(If you live in one of the states that prohibit surcharges, you probably notice that gas stations do this quite often.)

How Can Merchants Implement Credit Card Surcharges or Cash Discounts?

Unfortunately, while surcharges are fairly straightforward in theory, actually implementing them can be more difficult. This is because of rules and regulations imposed by government regulations and credit card associations. Some examples include:

  • Limits on surcharge amounts impose by credit card associations
  • Prohibition on surcharges for debit card transactions resulting from the Dodd-Frank Act
  • Requirement that “appropriate notice” be posted in-store from credit card associations
  • Requirement that point of sale systems record surcharges and a separate line item for reporting purposes
  • And more

How a POS System and Other Merchant Services from Turnkey Can Help

If you’re a merchant interested in implementing credit card surcharges or cash discounts for your business, but you want to make sure you’ve got the right hardware and expertise on hand, the team at Turnkey Processing can help.

Turnkey specializes in offering point of sale systems and credit card terminals that comply with all relevant regulations and requirements for credit card surcharges, and has the expertise you need to make sure your t’s and crossed and i’s are dotted.

Want to learn more? Get in touch today.

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