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What is Zero Cost Processing, Cash Discount & Surcharging?

Nov 02, 2022

There are some incredible costs associated with running a business, and when the economy dips or when an industry is in a state of flux, a business owner might decide to consider... (Continue Reading)

What is Zero Cost Processing?

Accepting credit cards typically carries a 2-4% processing fee, which is paid by the merchant. With zero-cost processing, merchants “pass along” the costs to their consumer, thus avoiding the typical processing fees. Zero-cost processing can utilize several different methods – surcharging, cash discounting, or non-cash adjustments. Some merchants can truly offset 100% of their processing fees! Most merchants can expect at least an 80% - 90% reduction in their monthly fees, depending on their circumstances.

Surcharging is now legal in 46 states, while cash-discounting and non-cash adjustments are legal nationwide. These various methods of payment cost reduction have subtle differences and require merchants to follow specific rules. As such, it’s important to work with industry professionals who can learn your needs and craft a solution that matches your business.

Small businesses can typically save upwards of $9,500/year in processing fees by utilizing zero-cost processing methods. With new technology, the payment terminal you use will automatically adjust pricing and receipts to ensure that you are fully in compliance and following all state regulations. We provide the signage, we handle all appropriate registration requirements, and guide you through the process, which only takes a day or two.

If your business isn’t ready for zero-cost, check out our membership pricing. Pay a simple, flat monthly fee above cost so there are never any big surprises. 


What is Cash Discount?

Cash discounting (as well as non-cash adjustments) allow merchants to give a discount to their customers for paying cash. This has been employed across the country for a long time – think gas stations! They post two prices, a “cash” and “credit” price. This system is nice because you can simply raise prices modestly to “incorporate” credit costs. Then, as the merchant, you don’t change your posted prices when accepting credit cards! Instead, our software automatically applies a “non-cash adjustment” line item to all transactions. When customers pay with cash, that line item is removed, and the customer gets a cash discount. If the customer pays via any other means, they will still incur the non-cash adjustment line-item fee.

Confusing? It can be! But at the end of the day, our job is to make it work. You run a sale, you keep 100% of the funds, or close to it. Cash discounting is a fantastic way to ensure that your profits aren’t eaten up by exorbitant processing fees. There are nuances and regulations you need to be aware of, which is why it is important to work with a trusted provider to set your business up properly.


What is Surcharging?

Surcharging is the act of adding a fee to a consumer’s credit card, with the intention of offsetting the processing costs. Surcharging has historically been frowned upon by the card associations, but that has recently changed with the outcome of several recent Supreme Court rulings. Now, surcharging is only prohibited in a few states based on individual state laws. The vast majority of the country is fully allowed to surcharge credit card transactions as of 2017. But wait! Before you start adding a fee onto your sales, make sure you’re aware of how it works:

  • You can only surcharge credit cards in particular. You may not add a surcharge to debit or prepaid cards.
     
  • You must post signage that clearly informs your customers prior to the sale taking place.
     
  • You may only surcharge a maximum of 4% of the value of the sale.
     
  • You must register with the card associations to inform them of your intentions.
     


As you can see, it’s important that you work with a provider who is trained in the nuances of surcharging.

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