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Education

StreetSmarts SM

“Starting in the Street

and ending at the

Merchant’s front door”
Steve Norell

The next to last word

on surcharging — maybe

By Steve Norell That is often not what is happening in practice today.
US Merchant Services Inc. Based on the rules of Visa and Mastercard, many current
"cash discount" programs are in direct violation of the
ow did we get to this place in our industry card brands' rules as they pertain to surcharging. The next
where cash discount, surcharge or whatever thing many "cash discount" programs implemented today
name you want to give it, has taken on a life do is surcharge debit cards, which is in direct violation of
H of its own? There are important distinctions the Durbin Amendment to the 2010 Dodd-Frank Act.
between cash discount and surcharging programs, but
they share the same objectives, and from where I stand, So, if many such programs are in violation of Visa and
they are receiving more attention than previously for two Mastercard rules and federal regulations, why is it
reasons: still happening and why haven't the major card brands
1. Merchants are fed up with the fees they pay to dropped a hammer on ISOs, MLS and merchants?
accept credit cards. The card brand rules
2. ISOs and merchant level salespeople (MLSs) are The rules that Visa and Mastercard presented to the
fed up with having to charge less and less for the industry when they agreed to allow surcharging were as
services they provide, which translates into less and follows:
less monthly residual revenue.
1. Post a sign that states there will be a surcharge
At some point push comes to shove and the next thing when paying with a credit card.
you know, we have arrived at the surcharge/cash discount 2. Limit the surcharge to no more than 4 percent of the
demilitarized zone. transaction.
Too many violations 3. Register the merchant with Visa and Mastercard.
4. Calculate the surcharge by using a one year average
So, let's look at the first and most popular method of this of that respective merchant's effective rate.
latest craze: cash discounting.

For starters the name and model are both in conflict For a preponderance of cash discount programs today,
of each other as it was meant to be implemented. Cash numbers 2,3 and 4 above are all being violated, and for
some goofy reason, all the cash discount providers appear
discount means exactly what it says. If you pay with cash,
you will get a lower price at the checkout counter based to be convinced this is not surcharging, so the rules don't
apply.
on the price on the shelf. If you pay with a credit card, you
will pay the shelf price at the counter.
You may also ask, if this is a violation, then why do the
large processors allow it? And since they all have lawyers,
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