​Credit Card Surcharge

A surcharge is when a merchant charges a customer an additional fee to cover the cost of accepting credit cards. The surcharge is a percentage of the sales amount and cannot exceed 4 percent or what the merchant pays in swipe rates. There is no sales tax for this additional fee nor are tips affected since they are not included in the surcharge calculation.

Surcharges cannot be levied on debit cards or prepaid credit cards.

Currently, all but six states and Puerto Rico allow surcharges. The states where it is illegal are Colorado, Connecticut, Kansas, Maine, Massachusetts, and Oklahoma.* If you are operating in more than one state, you can only surcharge in states where it is legal.

Visa, Mastercard and other major card brands have strict guidelines for surcharging. For example, you can’t charge more for one card than another. Additionally you must:

Post a notice to customers, at your store’s entrance and register, that your business imposes a credit card surcharge, including the rate of the surcharge, and that it does not exceed your processing fees
Have a point of sale system capable of disclosing the surcharge on a receipt as a separate line item, as well as reporting the surcharge in the network authorization request and in settlement
Notify your processor/merchant account provider in writing at least 30 days in advance of the date you plan to start surcharging. In turn, they will inform card associations.  Q. Where can I get more information about Visa’s rules related to surcharging, requirements  for surcharging and other related information?   Merchants can access this and other information by visitinghttp://www.visa.com/merchantsurcharging 

Cash Discount (INCREASE YOUR PRICES=INCREASE MARGIN)

A cash discount is not a surcharge   because it does not levy a fee to a credit card transaction.

Instead, it allows merchants to offer customers a discount for using cash, check or debit card to pay for purchases – typically 1-4 percent of the sales amount. To participate, merchants must disclose to customers that a discount for paying cash is available.  Must have a point of sale system capable of disclosing the discount on a receipt as a separate line item.   An example of this is a gas station, which posts a price for both the discounted cash/debit price and for credit card payments at the pump.   Sales have sales tax consequences, when the sales total is greater than the cash discount the appropriate sales tax must be applied.  Your POS cash register needs to tally up total sales tax when you do reports.


It’s important to note that a merchant cannot add a fee on top of the usual price of an item and then give a discount at the register if the customers pays cash. The passage of the Durbin Amendment in 2010 made cash discounting legal in all 50 states.  Expressions Hair Design v. Schneiderman, 581 U.S. ___ (2017), was a United States Supreme Court decision that held that price controls, when used to prohibit the communication of prices of goods with regards to a cash discount (not a surcharge), was a regulation of speech and required an analysis of the First Amendment's protections for freedom of speech.  Here is an excerpt from the Durbin Amendment which also pertains to cash discounting:

“Limitations on restrictions on offering discounts for use of a form of payment.  A payment card network shall not directly or through any agent, processor, or licensed member of the network by contract, requirement, condition, penalty, or otherwise inhibit the ability of any person to provide a discount or, in kind, incentive for payment by the use of cash, checks, debit cards, or credit cards to the extent that…”

Convenience Fee

A convenience fee is levied by a merchant on purchases for the privilege of paying with an alternative payment method that is not standard. For example, a theater or concert venue that allows customers to purchase tickets online or by phone for a fee versus having to stand in line at the box office. Governments and universities also frequently charge a convenience fee when taxes and tuition are paid by a method other than automated clearing house (ACH) transfer.

A convenience fee is typically a flat dollar amount. It is not a surcharge because technically, you're not paying for using your credit card, but for the privilege of using the pay-by-phone or pay-by-online option.

Convenience fees are allowed in all 50 states. As with surcharges, it is best to check with card networks and your processor. For example, Visa allows convenience fees if:

Payment takes place across an alternative channel such as online or by phone
Customers are told of the fee in advance, or it is clearly disclosed
The fee is a flat or fixed price rather than a percentage of the sale

* State status is subject to change. Confer with legal before implementing any fee related program.

Beware of Surcharge Programs by Any Other Name
Surcharge programs labeled as cash discount programs have begun popping up. Misleading and non-compliant with card brand guidelines, they are creating confusion about the difference between surcharges and cash discounts. Unfortunately, that’s also putting businesses at risk.
Whenever you post a price and then add a fee at the point of sale, it constitutes a surcharge under law. The term surcharge means increasing the regular price to a cardholder which is not imposed upon customers paying by cash, check or similar means.
Some restaurant and retail business have started offering “cash discount” programs that are actually surcharge programs in disguise. Here’s a look at the most common:
“Non-cash adjustment” or “service fee”
A business may charge a “non-cash adjustment” or “service fee” at checkout for non-cash paying customers. But regardless of what the business calls it, this is a surcharge, because it’s adding a charge at the point of sale beyond the posted price.
Additionally, surcharges are never permitted on debit or prepaid cards. This is true even if cards are “run as credit” and even in states where surcharge is legal. If you are adding a surcharge to a debit or gift card transaction and calling it a “non-cash adjustment,” you’re non-compliant.You cannot apply a fee above the listed price to a debit or prepaid card, no matter what the fee is called.
Posting “cash prices”
The posted price refers to prices posted on shelves, menus and in advertisements. Some businesses may, however, claim the posted price is the cash price, and then charge non-cash paying customers more at checkout. This again is a surcharge.
A true cash discount must be a reduction in price.If the posted price is the cash price,then no cash discount on the posted price is being offered. If a business posts a $10 price on the shelf, it would need to charge cash paying customers less than $10 at the register in order to be offering a cash discount.
Implementing a true cash discount program is fine, but keep in mind that to do so, you need to list credit card prices on the shelves. Otherwise, it’s a surcharge program.
Visa clears the air
In response to misleading cash discount programs that violate its rules, Visa has provided some clarity. The company reiterates that a discount for cash is different from a surcharge, and charging a fee for paying with cards is, by definition a surcharge. It adds that its cash discount rule prohibits programs where businesses add a fee on top of the normal price of the items being purchased, and then give an immediate discount of that fee at the register if the customer pays with cash, debit card or prepaid card.
Visa goes on to say that merchants who engage in this type of cash discount program are subject to non-compliance action, which can have serious repercussions, including hefty fines and having your merchant account shut down.
Know the rules
Nothing is inherently wrong with cash discounts or surcharges, but any card accepting business must abide by payment card network rules. State laws also come into play. Six states ban surcharging: Colorado, Connecticut, Kansas, Maine, Massachusetts and Oklahoma.
A legitimate surcharge program:

Must disclosed surcharge to customers at business entrances and point of sale.
​
Does not use creative terms to label a surcharge fee, such as non-cash adjustment, non-cash fee, or service fee.

Complies with card brand rules of applying surcharge to posted price

Applies surcharge to all card brands equally

Distinguishes between credit, debit cards and prepaid cards

Cannot exceed 4% of the total transaction cost

Discloses the surcharge on the customer’s receipt

Only surcharges U.S. transactions (international transactions are exempt)

No restaurant or retailer wants to wind up in court because of credit card fees, or have its card processing privileges taken away.


VITAL SELECT E13 E15

Peter romanofsky

Cash Discount vs. Surcharge. A cash discount is when you post credit card prices and offer a discount on that price for customers who pay with cash. A surcharge is when you post cash prices and  charge an additional fee on top of that price for customers who pay with a card.

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