Surcharge & Cash Discount Presentation - Audit Advantage - Credit Card Processing Audits, Cost Reduction, PCI and Cyber Forum

Overview Of The Payment Processing Landscape

Anonymous — Tue, 08 Aug 2023 21:54:20 +0000

The payments ecosystem is complex and is composed of many players
• Card brands and Debit Networks (Visa, MasterCard, American Express, Interlink, Star
• Acquirers, Processors and ISOs (Global Payments, Fiserv, WorldPay)
• Card issuers (Chase, Citibank, Capital One)
• Gateways (Authorize.net, Braintree, Stripe)
• Point-Of-Sale and Software providers (Versirent, HighTouch, RTO Pro)

Each of these players is fighting for a piece of your credit card processing fees
• Generally, 20% of your total processing fees should go to your processor and the remainder should go to the passthrough fees (i.e. interchange and brand fees)

Why Surcharging And Cash Discounting Are Growing

Anonymous — Tue, 08 Aug 2023 21:53:21 +0000

• Regulations surrounding surcharging and cash discounting have been relaxing
• Credit card processing fees are becoming a larger operating cost
• Fees continue to rise, payment processing costs are becoming prohibitively expensive, and credit card processors continue to raise their rates
• Merchants are looking for new ways to pass the processing costs on to their customers
• Uncertain times and the recent COVID pandemic has made cardholders more sympathetic to the costs merchants face

Credit Card Surcharging – What Is It?

Anonymous — Tue, 08 Aug 2023 21:52:21 +0000

• A surcharge is when you post/list/advertise cash prices and charge an additional fee on top of that price when a customer pays with a credit card
• If you charge more at the register than the listed price, it is a surcharge, regardless of what processors call it (e.g. non-cash adjustment, service fee, etc.)
• The surcharge is typically ranges from 3-4%
• Surcharging has not always been permitted, but recent lawsuits and settlements have loosened the regulations
• A surcharge is a way for merchants to pass the credit card processing fees to their customers

How surcharging works

Anonymous — Tue, 08 Aug 2023 21:51:24 +0000

• A surcharge means the customer pays more than the listed price
• A surcharge is a fee added at the point of sale
• The surcharge increases the total amount due by the customer

Considerations & Facts About Surcharging

Anonymous — Tue, 08 Aug 2023 21:50:34 +0000

• Surcharges are legal in most states (prohibited in Connecticut and Massachusetts)
• The card brands allow surcharging when requirements are followed
• When allowed, surcharges are ONLY ALLOWED ON CREDIT CARDS
• Debit cards and prepaid cards CANNOT be surcharged, even if run as credit
• Surcharge is no greater than the merchant’s cost of credit card acceptance
• Surcharges are capped at 4.00%, except in Colorado where the cap is 2.00%
• Surcharge must be the same for all transactions and card types
• Businesses must inform customers about the surcharge before checkout
• Signage must be displayed at the front of the store and during checkout

• Customer opinions and Consumer reactions
• Cardholders are beginning to experience ‘fee fatigue’
• Credit card vs. debit card mix
• Comparison to your competition
• May require new equipment or software
• Violating the surcharge rules can result in fines of up to $25,000
• Surcharging rules could change in the future
• Surcharges must be returned to the cardholder when processing a refund

Implementing A Surcharge Program In Your Stores

Anonymous — Tue, 08 Aug 2023 21:48:56 +0000

Decide whether a surcharge program is right for you and how much you plan to surcharge
Partner with a reputable processor
Notify the card brands and your acquiring bank 30 days prior to your intent to surcharge
Purchase and install equipment/software (If needed). Make sure receipts disclose the surcharges
Notify customers that credit card purchases will be subject to a surcharge by placing signage at the entrance to your store and at all points of sale
Update the checkout page of your website, and any alternative payment methods, with notifications about credit card surcharges (if needed)
Begin surcharging!

PROS and CONS of surcharging

Anonymous — Tue, 08 Aug 2023 21:47:06 +0000

PROS

Surcharging can help your bottom line
Eliminates or minimizes credit card processing fees
Still allows your customers to pay with credit cards
Cash payments can reduce your customer’s bill
Acceptance is improving among card holder

CONS

Illegal in some states
Potential fees/fines for non-compliance
Not able to surcharge debit or prepaid cards
Surcharges may alienate or upset customers because it seems like a penalty
Customers may shop elsewhere when they see surcharges

Cash Discount – What Is The Difference?

Anonymous — Tue, 08 Aug 2023 21:44:40 +0000

• A cash discount is when you post/list/advertise credit card prices and offer a discount for customers who pay
with cash
• If you charge less at the register than the listed price, it is a discount
• The discount MUST be a reduction from the listed, posted or regular price
• A true cash discount does not add any fees or charges at the register, website or point of sale
• Some jurisdictions may require your business to post the card price and the cash price (aka dual pricing)
• Incentivizes customers to pay with cash

Considerations & Facts About Cash Discounting

Anonymous — Tue, 08 Aug 2023 21:43:06 +0000

• Cash discounts are legal in ALL states because of the Durbin Amendment that passed with the Dodd-Frank financial reform legislation
• Does your business prefer cash over credit card payments?
• Cash discounting is not effective in a card-not-present or online environment
• Are credit card processing fees already accounted for in the cost of your goods or services?
• What is your average ticket?
• Customers may not carry sufficient amounts of cash for large purchases
• Businesses must inform customers of the cash discount before checkout
• The cash discount can be different for different goods or services in your inventory
• What are your customers saying and competitors doing?

Implementing A Cash Discount Program In Your Stores

Anonymous — Tue, 08 Aug 2023 21:42:15 +0000

Determine your credit card processing costs and how much you plan on discounting
Consider updating your prices
Decide whether your discount will be the same for all goods/services
Purchase and install equipment/software (If needed)
Post proper signage at the entry of your store and the point of sale - or consider dual pricing
Begin offering a discount for cash sales!