Find out the difference between Cash Discounting, surcharging, and adding on service/convenience fees–along with how to eliminate paying credit card processing fees entirely.
The fact is, credit card payments are much more complex than paying with cash or check. Card networks, issuing banks, payment processors etc, all have to be involved with each credit card payment so that everything takes place quickly and securely.
But with all of this work going on in the background, it’s important for business owners to remember that paying with a credit card isn’t free; everyone involved charges a small fee for their part in the process–with the business who accepted the payment usually having to pay these fees.
However, there are ways for businesses to pass these fees on to other parties, including Cash Discounting, surcharging, and convenience fees. What does your business need to know about them? And which one is right for you? Let us show you.
Cash Discounting Vs Surcharging: What’s the difference
Both Cash Discounting and surcharging are ways for businesses to have the customer pay a small fee for using their credit card. So what’s the difference?
First, let’s establish what each one is. Surcharging is where a merchant automatically adds on a small fee to pay for credit card fees. However, there are a number of downsides to a surcharging. For example, it’s not legal in all 50 states: Connecticut, Maine, Massachusetts, and Oklahoma are among those that do not allow surcharging according to Visa. Not only that, but debit and prepaid card transactions can’t be legally surcharged.
However, Cash Discounting works by allowing businesses to have the credit card processing fee paid if the customer decides not to pay with cash (or check). With this system (which is also called Zero-Fee Processing), the customer can pay less if they choose not to pay with their credit card. If they decide to use their card, however, they pay the fee that’s added on to the total as a NCC (non-cash charge) line item.
So even though both Cash Discounting and surcharging have the customer pay the credit card processing fee, the two differ by how that processing fee is applied to the transaction: surcharging adds it automatically to all credit card payments, whereas Cash Discounting gives them the option to pay with cash–and so their fee is the result of their decision to pay with their credit card.
Surcharging Vs Service Fee/Convenience Fee: What’s the difference
Service fees/convenience fees get their name from the ‘convenience’ of paying with a simple credit card vs the complication of writing out a check or using dollar bills. So if a customer decides to pay with their credit card, or if they pay from a non-standard location such as a business’ website (compared to their in-store location), they may be charged these types of fees.
So the difference between surcharges and convenience becomes clear: surcharging is applied by a business to all credit card processing transactions; convenience fees depend on a variety of factors, such as purchase location.
It’s also important to note that these fees may need to be regulated by credit card companies. For example, Mastercard only permits federal programs to charge a convenience fee, such as for payments for education or tax-related payments.
By now, the winner is clear: Cash Discounting saves businesses from paying processing fees while also being the easiest to implement. It’s 50-state legal, can be used with debit and prepaid card payments, and isn’t subject to credit card company regulations.
How to start Cash Discounting
Even though Cash Discounting is the best way for businesses to eliminate paying processing fees, it’s not something that a wise business person wants to do on their own because of how complex it is to implement from scratch.
Visa, Mastercard, Discover, and American Express forbid any business from adding an extra charge to credit card payments without taking the necessary steps to get approved—which is a difficult process for a business to implement on their own. Not only that, but it’s illegal to charge the customer more than the cost of the fee–which can be exceedingly difficult to do for a business person on their own. Fines can result, which erode any savings from the system and more.
Fortunately, your business will end up ahead almost immediately by PPS implementing Cash Discounting for you. In fact, you can try it risk-free to see if you like it.
Schedule a free call today with our Progressive Payment representative to start Cash Discounting and eliminate 100% of your credit card processing fees.