Thursday, February 05, 2009

Credit Card Processing: How to Legally Beat the System by Passing Processing Fees to Customers

Imposing surcharges on credit card transactions is illegal, and it will only lead to problems. The secret to whipping the credit card processing system is not charging more than for credit card sales, but instead is charging less for cash sales. It may sound like the same thing, but there is a large difference.

The increasing costs associated with accepting credit cards are leaving many merchants searching for ways to go through along at least a part of processing disbursals to their customers. Card conceivers such as as as VISA and MasterCard are becoming wary of this new tendency and are enforcing hard-and-fast ordinances specifically designed to impede any such attempts by merchants to enforce surcharges on credit card purchases.

Discount fees, transaction costs, and other disbursals associated with the acceptance of electronic bank cards (credit and debit entry cards) are putting a strangle clasp on to the network net income of businesses of all sizes. To assist minimise the impact that processing costs are having on profits, many businesses are charging a surcharge to clients that take to pay for merchandises or services using a credit or debit entry card.

Card conceivers such as as VISA, MasterCard, American Express, and Discover have got a batch to lose if the pattern of imposing surcharges on credit card transactions goes popular among merchants. When merchants enforce surcharges on credit transactions, they do purchasing on credit a less appealing option to consumers, and many consumers take to avoid the further cost by simply paying with cash or a check. A lessening in the usage of credit cards by consumers translates directly into lost gross for processing banks. Not only make banks lose out on the processing fees that they would have got got collected from the merchant, but they lose any finance charges that would have been incurred by the client as well.

You may inquire why so many businesses still take to put a surcharge on credit transactions, even though it is strictly forbidden in the processing understanding they had to subscribe when gap their merchant account. Quite frankly, many business people take to disregard this clause in their processing understanding and enforce a surcharge anyway. This attack 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 do it nearly impossible for them to get another merchant account.

Card conceivers and banks have got control over credit card (bankcard) transactions, and they can legally ban a merchant from imposing surcharges. However, they make not have got any legal control over other word forms of payment such as as cash and checks. The largest card conceiver (VISA) have even published information stating that, "You may, however, offer a terms reduction for cash transactions, provided that the offer is clearly disclosed to clients and the cash piece is presented as a price reduction from the criterion price charged for all other word forms of payment".1

Most merchant accounts operate on a tiered price reduction pricing power system and, ironically, the secret to whipping credit card processing fees is to enforce tiered pricing on your merchandises and services as well. The old saying, "if you can’t beat out em', fall in em’" uses perfectly.

While you can’t charge extra for credit card sales, you can charge less for cash as long as all terms are clearly stated to customers, and the cash terms is reflected as a terms reduction from the original purchase price. For example: if the terms tag on an point states that the point costs $10, the cash terms must be represented as a terms reduction from that price. The terms tag for this peculiar point should look something like this:

Price: $10.00
5% price reduction for cash payment @ $9.50
5% Discount for Check Payment @ $9.50

By utilizing a tiered pricing grid, merchants can relieve the cost of accepting credit cards, while still providing their clients with the freedom to take their preferable method of payment.

1. Published by VISA in the Card Acceptance and Chargeback Management Usher for VISA Merchants, ©2004

Copyright 2005 Jack Lang

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