As credit card processing gets more expensive, a burning concerns on the mind of lots of entrepreneur is, "can I pass charge card processing charges on to my customers, and if so, how?" Simply put, the response is yes; you can charge customers a fee for paying with a credit card, however the problem is far more intricate than that.
For merchants, the ability to accept credit cards features numerous benefits with the only genuine drawback being the cost of doing so. It's possible to eliminate this expense by passing it to clients, however begetters like VISA, MasterCard, American Express and Discover do not want merchants to charge customers a fee to pay with a credit card. The reason is pretty apparent. A fee would hinder people from utilizing their credit card which would eventually cause originators to lose loan.
Here's what the producers have to state about passing charge card processing fees to customers.
VISA mentions that "you may not enforce any surcharges on VISA deals. You may, nevertheless, provide a discount rate for money or another kind of payment (e.g., exclusive card or gift certificate) provided that the offer is clearly disclosed to clients and the money cost exists as a discount from the standard cost charged for all other types of payment" 1.
MasterCard states that "A Merchant must not directly or indirectly need any Cardholder to pay a surcharge or any part of any Merchant discount or any synchronous finance charge in connection with a Transaction. A Merchant may supply a discount rate to its consumers for money payments." 2.
Discover mentions that "You may evaluate an additional charge on a Card Sale carried out using a Charge card provided that (i) the amount of the surcharge may not go beyond the Merchant Charge payable by you to us for the Card Sale, and (ii) you examine surcharges on card sales performed utilizing other charge card accepted by you." 3.
American Express mentions that "You must decline the Card for costs or fees over the regular rate of your products or services (plus appropriate taxes) or Charges that Cardmembers have actually not specifically authorized." 4.
Every producer other than for Discover forbids surcharging charge card sales, nevertheless, as MasterCard so clearly states, "A Merchant might offer a discount to its customers for money payments." This declaration holds the secret to passing credit card processing charges on to customers. The technique isn't charging customers more for using a credit card; it's charging them less for utilizing money.
In order to charge consumers for credit card processing charges you must develop a double rates design. To accomplish this, raise all prices to offset processing costs and after that use a discount rate on money purchases that amounts to the cost boost.
The catch is that the money price need to be presented as a discount to the true rate. This means that cost, signs and advertisements must display the greater (charge card) price first and after that display the lower (cash discount rate) rate as a discount rate. Many gas stations use a money discount rate however they publish the greater (credit card) price on their roadside signs.
Passing credit card processing fees to consumers may appear like a great service concept in the beginning but it's possible that it might hurt organisation. Consider this; if clients stop working to look past the higher (charge card) price to notice the lower (cash discount) cost they may presume that your organisation has higher costs than your rivals.
Maybe the biggest concern to think about before charging customers to pay with a credit card is that some clients desire and even have to pay with their card. If paying with a card implies a greater cost at your company, these consumers will likely go somewhere else. This is specifically real in hard economic times when consumers are more likely to invest in credit.
It is possible to pass charge card processing fees to customers by offering a discounted money price, but doing so might cost more in lost capital one merchant services sales than the processing costs that you're avoiding.
1 – Source: "Card Acceptance and Chargeback Management Standards for VISA Merchants", Section "VISA Rules", "No Surcharging".
2 – Source: "MasterCard Rules" page 124, "Charges to Cardholders".
3 – Source: "Discover Operating Handbook", page 24, "Additional charges".
4 – Source: "American Express Running Treatments for US Merchants" section 1.7, "Prohibited Usage of the Card".