Imposing Surcharges On Credit Card Transactions Is Illegal, And It Will Only Lead To Problems

Category: Finance, Credit.

Imposing surcharges on credit card transactions is illegal, and it will only lead to problems. It may sound like the same thing, but there is a big difference.

The secret to beating the credit card processing system is not charging more for credit card sales, but instead is charging less for cash sales. The increasing costs associated with accepting credit cards are leaving many merchants searching for ways to pass along at least a portion of processing expenses to their customers. Discount fees, and other expenses, transaction costs associated with the acceptance of electronic bank cards( credit and debit cards) are putting a strangle hold on to the NET profits of businesses of all sizes. Card originators such as VISA and MasterCard are becoming wary of this new trend and are enforcing strict regulations specifically designed to hinder any such efforts by merchants to impose surcharges on credit card purchases. To help minimize the impact that processing costs are having on profits, many businesses are charging a surcharge to customers that choose to pay for products or services using a credit or debit card. When merchants impose surcharges on credit transactions, they make purchasing on credit a less appealing option to consumers, and many consumers choose to avoid the additional cost by simply paying with cash or a check. Card originators such as VISA, American Express, MasterCard, and Discover have a lot to lose if the practice of imposing surcharges on credit card transactions becomes popular among merchants.

A decrease in the use of credit cards by consumers translates directly into lost revenue for processing banks. You may wonder why so many businesses still choose to place a surcharge on credit transactions, even though it is strictly forbidden in the processing agreement they had to sign when opening their merchant account. Not only do banks lose out on the processing fees that they would have collected from the merchant, but they lose any finance charges that would have been incurred by the customer as well. Quite frankly, many business people choose to ignore this clause in their processing agreement and impose a surcharge anyway. When and if these businesses are discovered, their merchant accounts will be terminated, and they may even be placed on the Terminated Merchant File( TMF) which will make it nearly impossible for them to acquire another merchant account. This approach is not recommended. Card originators and banks have control over credit card( bankcard) transactions, and they can legally ban a merchant from imposing surcharges.

The largest card originator( VISA) has even published information stating that, "You may, offer a discount, however for cash transactions, provided that the offer is clearly disclosed to customers and the cash piece is presented as a discount from the standard price charged for all other forms of payment" . However, they do not have any legal control over other forms of payment such as cash and checks. Most merchant accounts operate on a tiered discount pricing grid and, the secret to, ironically beating credit card processing fees is to impose tiered pricing on your products and services as well. While you cant charge extra for credit card sales, you can charge less for cash as long as all prices are clearly stated to customers, and the cash price is reflected as a discount from the original purchase price. The old saying, "if you cant beat em, join em" applies perfectly. For example: if the price tag on an item states that the item costs$ 10, the cash price must be represented as a discount from that price.

By utilizing a tiered pricing grid, merchants can alleviate the cost of accepting credit cards, while still providing their customers with the freedom to choose their preferred method of payment. The price tag for this particular item should look something like this: Price: $100. 5% discount for cash payment@ $50. 5% Discount for Check Payment@ $50.

Read more...

Until Just A Few Years Ago, Filing For Bankruptcy Was Fairly Easy - Finance and Credit Blog:

Until just a few years ago, filing for bankruptcy was fairly easy. When Congress changed the nation s bankruptcy laws in 2005, many debtors found the new" Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, " to be more hindrance than help in overcoming past mistakes and starting anew.

Picking The Right Type Of Credit Card Online Is Essential - Ofelia Belfield about Finance and Credit:

Obtaining an online credit card does not exclude the possibility of ending up in with an unwanted debt, i. e. a credit card debt. The items that seem affordable at first may seem truly pricey when the bill comes.

Visa Offers Card Members Lots Of Extras - Finance and Credit Articles:

Credit cards offer a high level of security and flexibility to customers, and this is why so many people use their credit cards for day to day purchases as well as for special purchases. MasterCard and Visa are the names of the global companies who manage credit cards.