Merchants across the country are looking for ways to manage the rising cost of accepting credit cards. At the same time, states, regulators and the card brands are paying closer attention to how businesses pass those costs along to customers.
The result is a lot of confusion.
Terms such as surcharge, cash discount, non-cash adjustment and dual pricing are often used interchangeably, but they do not necessarily describe the same type of program. More importantly, calling a program something does not determine whether it is compliant. What matters is how the program actually works.
A fee does not automatically become a cash discount because it is called a “non-cash adjustment.” Processing a debit card without a PIN does not make it a credit card. And depending on the state, a sign at the register may not be enough if the customer does not see the appropriate price or disclosure before reaching checkout.
This is why understanding the structure of your program is so important.
For many businesses, a properly implemented dual-pricing program can provide a straightforward way to reduce or eliminate processing costs while giving customers a choice in how they pay.
Rather than adding an unexpected fee at checkout, dual pricing establishes the card price upfront and provides a lower price to customers who choose to pay with cash. The customer knows the price before making the payment decision.
First, Know the Difference
There are three common approaches businesses should understand:
- Credit card surcharge: An additional amount is charged when a customer pays with an eligible credit card. Surcharging is subject to card-brand rules and applicable state laws, including requirements involving disclosures, limits and eligible card types.
- Cash discount: The business establishes a regular price and provides a discount to customers who pay with cash or another qualifying payment method. The discount is taken from the established price rather than a fee being added at checkout.
- Dual pricing: The business establishes both a card price and a lower cash price, or establishes the card price as the regular price while clearly communicating the available cash savings. Customers paying by card pay the established card price, while customers paying with cash receive the lower price.
A Simple Question Can Tell You a Lot
When evaluating a program, ask this:
Did the customer know the price they would pay by card before they reached checkout, or was an additional amount added afterward?
That distinction is becoming increasingly important.
Businesses should also pay attention to debit cards. Debit does not become credit simply because the card is processed without a PIN. A program that adds a fee to debit transactions may create compliance concerns regardless of what the fee is called.
The Technology Has to Match the Program
Compliance is not just about putting up the right sign.
Your pricing, POS system, payment terminal, website, online ordering platform and receipts should all work together to support the program you are offering.
If the sign says one thing, the menu shows another and the payment terminal calculates something different, there may be a problem.
At Clarity EPS, our role is to help business owners understand the differences between these programs and determine which approach makes the most sense for their business.
There is no single payment program that is right for everyone. The goal is to implement the right program, with the right technology and the right disclosures, so both the business and its customers understand exactly how payments are being handled.
Before choosing a surcharge, cash discount or dual-pricing program, make sure you understand what you are actually implementing.
At Clarity EPS, we make payments simple.