| |
Credit Card
Processing: Legally Beat the System by Passing
Processing Fees to Customers
|
|
by Jack Lang
Imposing
surcharges on credit card transactions
is illegal, and it will only lead to problems. The
secret to beating the credit card processing
system is not charging more for credit card
sales, but instead is charging less for cash sales. It
may sound like the same thing, but there is a big
difference.
The increasing costs associated with accepting credit
cards are leaving many merchants searching for ways to
pass along at least a portion of processing
expenses to their customers. Card originators such as
VISA and MasterCard are becoming wary of this new
trend and are enforcing strict regulations
specifically designed to hinder any such efforts by
merchants to impose surcharges on credit card
purchases.
Discount fees, transaction costs, and other expenses
associated with the acceptance of electronic bank
cards (credit and debit cards) are putting a strangle
hold on to the NET profits of businesses of all sizes.
To help minimize the impact that processing
costs are having on profits, many businesses are
charging a surcharge to customers that choose
to pay for products or services using a credit
or debit card.
Card originators such
as VISA, MasterCard, American Express, and Discover
have a lot to lose if the practice of imposing
surcharges on credit card transactions
becomes popular among merchants. When merchants impose
surcharges on credit transactions, they make
purchasing on credit a less appealing option to
consumers, and many consumers choose to avoid the
additional cost by simply paying with cash or a check.
A decrease in the use of credit cards by
consumers translates directly into lost revenue for processing
banks. Not only do banks lose out on the processing
fees that they would have collected from the
merchant, but they lose any finance charges that would
have been incurred by the customer as well.
continued
below...
 |
|
|
|
|
|
|
Article Continued...
You may wonder why so many businesses still
choose to place a surcharge on credit
transactions, even though it is strictly
forbidden in the processing agreement
they had to sign when opening their merchant
account. Quite frankly, many business people
choose to ignore this clause in their processing
agreement and impose a surcharge anyway. This
approach is not recommended. When and if these
businesses are discovered, their merchant
accounts will be terminated, and they may even
be placed on the Terminated Merchant File (TMF)
which will make it nearly impossible for them to
acquire another merchant account.
Card originators and banks have control over credit
card (bankcard) transactions, and they
can legally ban a merchant from imposing
surcharges. However, they do not have any legal
control over other forms of payment such as cash
and checks. The largest card originator
(VISA) has even published information stating
that, "You may, however, offer a discount
for cash transactions, provided that the offer
is clearly disclosed to customers and the
cash piece is presented as a discount from the
standard price charged for all other forms of
payment".1
Most merchant accounts operate on a tiered
discount pricing grid and, ironically, the
secret to beating credit card processing
fees is to impose tiered pricing on your
products and services as well. The old saying,
"if you can't beat em', join em'"
applies perfectly.
While you can't charge extra for credit card
sales, you can charge less for cash as long as
all prices are clearly stated to customers, and
the cash price is reflected as a discount from
the original purchase price. For example: if the
price tag on an item states that the item costs
$10, the cash price must be represented as a
discount from that price. The price tag for this
particular item should look something like this:
Price: $10.00
5% discount for cash payment @ $9.50
5% Discount for Check Payment @ $9.50
By utilizing a tiered pricing grid, merchants
can alleviate the cost of accepting credit
cards, while still providing their customers
with the freedom to choose their preferred
method of payment.
1. Published by VISA in the Card Acceptance and
Chargeback Management Guide for VISA Merchants,
©2004
credit card processing
Keyword Search: credit card processing
About The Author:
Jack Lang is the senior contributor member at
http://www.merchantcouncil.org. The Merchant Council is a free
resource dedicated to assisting businesses obtain and manage credit
card processing and merchant account services. A
wealth of merchant account information can be found at
MerchantCouncil.org. Copyright Jack Lang - http://www.merchantcouncil.org
|
|
|
|
|
|
More Tips On Credit Cards |
|
|
|
|
|
Search By Type Of Cards: |
|
|
|
|
|
Search By Issuer: |
|
|
|
|
|
Related Credit Card Articles: |
|
The URL you supplied is either not RSS or the site is down at this time. Please check the feed URL or refresh the page. |
|
