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Education

Don't skirt cash discount 4 percent. Surcharges may be applied
only against credit transactions. Debit
and surcharging rules cards, regardless of whether the PIN
is entered, may not be surcharged.

By Ken Musante Surcharges differ from convenience
fees which are typically applied
Napa Payments and Consulting as a flat amount and are limited by
type of merchant and/or method of
ash discount and surcharge programs have appeal, because mer- acceptance (ecommerce, for example).
chants hate paying a fee to get their money. They can easily identify Visa requires acquirers to register
and quantify payment processing costs. Less clear are the costs for U.S. merchants at least 30 days before
C reconciling a sudden increase in cash. Any bar owner can attest cash assessing a surcharge.
shrinks faster than a new pair of 501's. The goal of surcharge and cash dis-
count programs is to lessen payment processing costs without impacting sales Surcharging is ideal for businesses
or burdening staff with extra duties. But these programs need to be explained with high average tickets and
to cardholders, and this takes time and slows checkout. A day may come when inelastic purchases. Surcharging
the programs are self-evident, but as Aragorn reminds us, "It is not this day." does not make sense, however, for
low ticket items; because of the 4
Surcharging and cash discounts are governed by a patchwork of card brand percent cap, the maximum surcharge
rules and laws designed to protect consumers and dictate the context when on a $5 purchase is $0.20.
these rules may be applied. Though surcharge and cash discount programs are
similar, there are distinctions businesses must respect. Cash discounts

Surcharging Cash discount programs reduce the
transaction amount if the customer
Surcharging adds a fee on top of the transaction amount. If you sold an item is paying with cash. For example, a
for $100 and the surcharge was 3 percent, the total at checkout would be $103. $100 transaction becomes $97. Cash
Surcharges must not exceed the merchant's discount rate, nor may they exceed discounting has gained traction as
merchants have employed signage
to manage disclosures. For example,
a merchant's signage may state,
"A Service Fee Is Applied to All
Transactions" and "Cash Discounts
are Applied to All Cash Purchases."
In this context, all card transactions,
even debit transactions, are charged
the full amount (which includes the
service fee) of the purchase.
Living on the edge

Some processors refuse to offer
this form of cash discounting as
they have deemed it a mislabeled
surcharge. They are concerned that
such programs violate either the law
or card network regulations and that
by offering such programs, they are
complicit.

Card networks have begun reaching
out and demanding acquirers assess
and attest to compliance with the law
and card network rules. The networks
want to know, for example, how debit
cards are exempt from surcharging
when this strategy is employed.

This is an interesting tack for the
card networks. Historically, they
have managed surcharge and cash
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