Everything You Should Know About Zero Fee Processing

In the U.S. alone, merchants pay about $80 billion each year to companies like Visa and MasterCard, just in credit card processing fees. But with zero fee processing, merchants don’t have to pay a penny in fees. After years of protracted legal battles, courts eventually sided with merchants to make this possible.

Today, almost anyone who accepts credit card payments may qualify for substantial savings that boost the bottom line. That’s because the zero fee process, commonly referred to as surcharging, is now allowed in all but a handful of states. In the wake of recent major court decisions, experts predict that it will likely be legal throughout the United States by 2020.

Compliance is the Key

But without understanding the guidelines that govern surcharging, merchants can find themselves both confused and in legal jeopardy. Credit card processing companies have binding contracts with every merchant they serve. Under the terms of those agreements, they may deny merchants service in the event of noncompliance. That could ultimately result in a merchant losing the ability to process credit card transactions. Obviously that could be financially devastating for anyone relying on credit card payment revenue.

How to Easily Comply

The CardX company has been on the front lines of this issue for years, and helped push for the legalization of no-fee processing. With surcharging now legal in most states, the tech company offers businesses an affordable turnkey surcharging platform solution. Merchants using a CardX payment terminal or software ensures that every transaction is 100 percent compliant. When the software detects a credit card, it automatically passes the processing fee along to the customer or buyer, in a way that incorporates full legal disclosure. Merchants pay zero processing fees, while remaining fully compliant, as long as they are in a state that allows surcharging.

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Credit vs. Debit Transactions

Merchants are also provided with legally compliant signage to transparently notify all customers that they can avoid the surcharge by paying with a debit card or in cash. The system will also automatically detect whether the card is a credit or debit card. That’s critical, because credit and debit cards look very similar, and it can be hard to detect the difference. But surcharging on a debit card transaction, even accidentally, can trigger noncompliance. Even if the customer asks to have the debit card processed as a credit card transaction, it is still non compliant.

Discounts vs. Surcharges

Another source of potential confusion is the fact that “cash discounting” may sound like “surcharging.” But these terminologies refer to two very different things. A cash discount is when the merchant posts prices for products or services but then offers cash-paying customers a discount and refund at the point of sale. Processors like Visa do not allow this kind of cash discount. A surcharge does not give a discounted price. Instead, it calculates the merchant’s credit card processing fee for the transaction and adds it to the amount charged to the customer. The posted and displayed price of merchandise or services remains the same and is paid in full. But a nominal charge equal to the processing fee is added on top of that price at the point of sale.

That is, in a nutshell, everything merchants need to know about zero fee processing and how to take advantage of it and save money.