Credit Processing & Cash Discounts- What merchants need to know

Currently companies like Visa and MasterCard charge upwards of three and sometimes four percent for the pleasure of taking credit processing fees that business owners have been paying accept customer credit purchases. Currently card holders are lured with 2% cash back programs and even the fancy travel and airline mileage programs, however it is the merchant who is paying for those after they’ve already toiled hard and long early mornings late nights to bring those products and services to the customer.

At 1st National Processing, we offer credit card processing that works for anyone who doesn’t have a clear picture of what they need to process credit cards with the most reliable service as competitive costs.

At the end of each month, merchants are stuck having to pay of roughly 3%, and some are paying upwards of three and a half percent. And in the merchant processing world there’s always going to be this processing fee that’s going to be paid, the fees that are paid are always going to be different based on the type of card that’s used.

Just to give you a picture of how that works, there are literally hundreds of different cards with hundreds of different rates and depending on where you shop, you get different amounts of points that’s why you guys have probably seen credit card ads offering you a 2% cashback on gasoline, and others have an Amazon card so that when you shop on Amazon you get 3% on Amazon purchases. Yet this same card will only get you 1% everywhere else, andthe reason for that is because all these different cards have different rates depending on where you shop and what kind of card you have.

So for example if you have a Visa signature preferred or Visa Infinite card and you’re shopping at a supermarket, you’re going topay the supermarket’s 2.1 percent plus ten cents whatever that transaction is.

Now if you have a regular Visa card with the basic rewards, then you might only pay 1.43 percent and some cents. So as you can see, there’s a huge swing that exists in the processing fee structure and most merchants have major problems with this because they can never calculate what their costs are in any given scenario.

This uncertainty becomes a huge difficulty that they have to overcome on a regular basis. Some merchants find it hard to obtain a copy of the interchange fee schedule, however it is possible to easily use Google to find interchange rates; Visa interchange rates, MasterCard interchange rates, Discovery and so on.

You can then call these straight off the internet, referring to their websites- as this is alll public information.

Many popular cards can soon become very expensive- often purchases made on one of these expensive credit cards at a hotel or car rental place can amount to a 2.4 percent plus 10 cents fee and again this is the cost before the processor, before the bank, before anybody else is involved!

So supposed low Visa rates at at 2.4 percent might actually end up being three point six percent before all is said and done because other people have to get their piece as well, so you have the issuing banks and the providers of the processing service take their peace. And this leaves confused merchants with no idea what they’re paying. Often, they don’t even know why they’re paying it!

All they know is that they can tell you how their bill is too high even though they started off thinking they have a great rate. Often small merchants will think they have a great rate at 25 basis points, which looks amazin, but once our company takes a look at that statement we find that 25 basis points was 25 basis points after cost, which is accompanied by an additional 10 cents. So now this great 25 basis points in this scenario with a card of 2.4 percent ends up being a bill of 2.65 percent plus 20 cents in this current scenario- yet the merchants don’t realize this is happening.

Obviously, there’s a lot of complexities to this and it becomes very annoying for merchants and they have no way of figuring it.

At 1st National Processing, what we do is is listen to merchants describe how they are paying too much and then we go to work figuring out a way around this.

Our process is to look at different industries that have been doing different things for years. One of the helpful things that we found was there are laws that enable a merchant to actually not have to pay those fees and if you inquire further, you find this is actually a federal law that says a payment card network (that’s referring to Visa MasterCard, Discover, Amex) shall not directly, or through any agent processor, licensed members of the network by contract requirement condition penalty or otherwise inhibit the ability for any person to provide a discount or in-kind incentive for payment by the use of cash cheques, debit cards, or credit cards.

To the extent that is required by federal law, that discount is offered to all prospective buyers and disclosed clearly and conspicuously- that’s a very important point and no one can be penalized for offering a discount for someone to pay cash and that’s the federal government law.

Once that law came about, which was in the year 2013, the big card companies had to change their policies. Visa, Mastercard, Discover and Amex did not allow for merchants to offer a discount for a different price for cash versus card, but now with that advancement in the law, Visa shows these terms and regulations on their own website.

By these rules merchants may attempt to steer customers who initially present a Visa card to an alternative method of payment, such as providing discounts for cash that’s instead of a card purchase as long as it’s not done in a confusing manner or denies the consumer choice. This means you have to be able to offer it evenly to everybody the same.

At 1st National Processing, we offer the latest info to our clients on the ability for merchants to provide discounts for cash. Essentially, what has happened over the past few years is that the big card brands (Visa, MasterCard, Discover), along with the federal government and most states, have allowed the merchants to pass the fees for their processing on to the customers.

The problem that exists now is that the big card companies are very smart and they said listen, you could do it, but you have to follow what we call surcharge regulations. Surcharge regulation means that if you’re charging an extra fee for the use of a card, well then you have to use their signage.

Specifically, you have to prove you have Visa signage, MasterCard, Discover or Amex signage on all four sides and you can’t charge certain types of cards and you can’t charge over a certain amount along with all kinds of rules and regulations. This makes it almost impossible for a small merchant on the street to go ahead and start surcharging, not to mention the fact that there are 11 states that do not allow for merchants to surcharge. We what you need to keep in mind is that every single state, regardless of where it is and regardless of card brand, allow for a merchant to offer a discount for cash.