Credit Card Processing
| Credit Card Competition Act.pdf |
Cash Discount and Surcharge Confusion
What's the Difference?
Surcharge
A fee applied to a published price when paying with a card. Published prices are the price paid with cash.
Cash Discount
A discount on a published price when paying in case. Published prices are the price paid with a card.
What's the Problem?
Merchants believe that by adding a service fee to all card transactions they are offering a "cash discount program." However, these transactions are not excluded from Visa surcharge rules simply because the merchant declared that a service fee is added to all transactions and a discount is applied for cash sales. Adding any fee to a displayed price is a surcharge. While it may sound like a minor difference, it's actually very important in terms of legality and compliance with card brand rules and agreement signed with your merchant payment processor.
When can an additional fee be added to published prices?
The ability to surcharge only applies to credit card purchases, and only under certain conditions. Surcharges cannot be applied to PIN-capable debit cards, even if the PIN is not being used for the transaction (this includes swiped check and debit cards).
Keep in mind, Visa is cracking down and sending in secret shoppers to identify non-compliance.
Simple Rules
Merchants can participate in a compliant surcharge program but there are some rules and regulations to keep in mind.
Surcharge Solution
Your credit card processor may have a solution. Heartland Payment Systems has a compliant credit surcharge program available to clients in any state where permitted by law.*
*As of early 2021, only Colorado, Connecticut, Kansas, Massachusetts, Oklahoma, and Puerto Rico continue to prohibit surcharging. Note that surcharging laws have been overturned by court decisions in several other states but are still on the books.
Surcharge
A fee applied to a published price when paying with a card. Published prices are the price paid with cash.
Cash Discount
A discount on a published price when paying in case. Published prices are the price paid with a card.
What's the Problem?
Merchants believe that by adding a service fee to all card transactions they are offering a "cash discount program." However, these transactions are not excluded from Visa surcharge rules simply because the merchant declared that a service fee is added to all transactions and a discount is applied for cash sales. Adding any fee to a displayed price is a surcharge. While it may sound like a minor difference, it's actually very important in terms of legality and compliance with card brand rules and agreement signed with your merchant payment processor.
When can an additional fee be added to published prices?
The ability to surcharge only applies to credit card purchases, and only under certain conditions. Surcharges cannot be applied to PIN-capable debit cards, even if the PIN is not being used for the transaction (this includes swiped check and debit cards).
Keep in mind, Visa is cracking down and sending in secret shoppers to identify non-compliance.
Simple Rules
Merchants can participate in a compliant surcharge program but there are some rules and regulations to keep in mind.
- Merchants must register with credit card brands before implementing a surcharge
- Surcharge can only be applied to credit cards - debit cards, gift cards and prepaid cards are excluded
- Surcharge should not exceed the merchant cost of acceptance, capped at 4%
- Signage must disclose the surcharge at the point of entry and acceptance
- Some states do not allow surcharge
Surcharge Solution
Your credit card processor may have a solution. Heartland Payment Systems has a compliant credit surcharge program available to clients in any state where permitted by law.*
- Automates the addition of surcharge at checkout when appropriate
- Complies with card brand rules - applying surcharge to regular posted price
- Deposits sales proceeds and surcharge revenue the next day
*As of early 2021, only Colorado, Connecticut, Kansas, Massachusetts, Oklahoma, and Puerto Rico continue to prohibit surcharging. Note that surcharging laws have been overturned by court decisions in several other states but are still on the books.
FAQs
When tips are charged on credit cards, you are allowed to deduct from the tip the same percentage as the credit card company charges you. If you pay the with credit card company a 2 percent discount rate, you can deduct 2 percent from the server’s tip. Example: the customer charges a $10 tip and you give the server $9.80.
You do not have to pay your server the same night the tip is earned but, regardless of when you receive the money from the credit card company, you do have to pay your server by the next regular payday. WRA recommends charged tips be paid out through the regular payroll. This ensures that there will be enough money on the employee’s check to cover taxes and other deductions
