Everything You Need to Know About Credit Card Surcharging

Meet the Author

Tom Coughlin, PhD is the owner and founder of The Merchant Way. He’s an engineer by training raised in the garden state, New Jersey. With his uncles owning businesses in Long Island, he grew up hearing the challenges small business owners face over family holiday dinners and barbecues.

In 2019, he learned that some credit card processors don’t do things right. They charge businesses high fees and crazy bogus line items. Tom set out to do things different and give better service with more savings, while being a company that could be counted on.

Which one is right for my business?

Imposing a surcharge or cash discount with a credit card processing company is a way to save without the headaches and red tape. One of the most important things that every small business owners need to know is that credit card surcharging is applicable in most states, but there are a few that it is not legal, and cash discount is the only way to recoup credit card costs.

If you want to learn more about credit card processing for small business owners, you need to read on.

What is a credit card surcharge?

For those of you who don't know, a credit card surcharge is an additional fee that needs to be paid for processing a credit card transaction. It is charged in order to cover merchant costs. It is important to keep in mind that surcharging credit cards is restricted in certain states. Some of the states which do not allow credit card surcharges include California, New York, Maine, Kansas, Florida, Utah, Texas, and Oklahoma. This means that it is illegal to impose a credit card surcharge in certain jurisdictions. 

States that do not allow credit card surcharges:

  • California

  • Florida

  • Kansas

  • Maine

  • New York

  • Oklahoma

  • Texas

  • Utah

What is cash discounting?

There are also other requirements imposed by Discover, American Express, Mastercard, and Visa. It is a good idea to go through the credit card surcharge laws of your state to stay on the right side. Credit card surcharge can also called cash discounting, but they are not the same. Cash Discounting is where a customer gets a discount for credit card processing when they make a payment in cash instead of a credit card. Merchants do not need to absorb the expense and can simply pass it on to the customer who pays using a credit card. It only applies where no other payment method is used. 

Which Should I Choose?

Credit card surcharging is legal in most states and it is a great way to save on credit card fees. Businesses can get back immediate profit by switching to surcharging. Cash discount is a great alternative to surcharging for businesses that take credit card in person. By offering a cash discount, businesses will be able to recoup the credit card costs by charging a 4% charge to the customer on non-cash charges. At The Merchant Way, we make sure to provide you with notice to consumers and documents for the surcharges.

Should I do pass on the fee to my customer?

At the end of the day, saving 4% each month from a cost on credit card processing is a simple way to help increase profits. For online and in-person businesses, its easy to see why most business owners have decided to switch to surcharging and cash discount in this post-COVID-19 world where high inflation, costs of goods and a few unknowns have made it challenging to just sit back. Do something for your businesses’ bottomline this year.

Boost Your Profits with Lower Fees

Ready to lower your credit card processing costs and boost your profits? The Merchant Way offers tailored solutions that save our clients up to $1,000 each month. Fill out our form to see how we can help your business save and thrive!

Learn more when you speak to a representative to see which processing is right for you.

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