Surcharging and cash discounting are practices that have been discussed among some associations as a means to offset the costs associated with credit card transactions. Given the negative implications and drawbacks of these practices, we have chosen not to offer functionality to pass along mandatory credit card fees.

This decision is based on the direct feedback from our customers representing many different industries and professions. One of those customers is the Association of Payment Professionals (APP). Their association supports risk, underwriting, and compliance professionals within the payment ecosystem, so they are intimately familiar with the nuances of taking credit card payments.

Complying with the regulations set by card schemes for surcharging and cash discounting can be challenging and time-consuming for merchants. The intricate rules and guidelines, as outlined by Visa, Mastercard, and Discover, often require meticulous attention to detail. Failure to adhere to these regulations can result in penalties and potential legal issues, adding further complexity to merchant operations.

Surcharging is prohibited or restricted by law in several states, including Colorado, Connecticut, Maine, Massachusetts, and Oklahoma. For businesses operating in these regions, the implementation of surcharging becomes unfeasible or requires careful navigation of complex legal frameworks. This limitation hampers the flexibility of merchants and can create disparities in pricing strategies across different locations.

Surcharging and cash discounting can create a negative perception of the merchant's business. Customers may view surcharging as a profit-driven strategy that undermines the transparency and fairness of pricing. This perception can harm customer relationships and impact the overall reputation of the merchant, potentially leading to decreased sales and diminished brand loyalty.

Surcharge fees are restricted solely to credit card transactions and cannot be applied to signature debit transactions or prepaid cards. Even if a debit card is processed as a credit transaction, implementing a surcharge is not allowed. As of the date of this article, QuickBooks Payments does not supply the card type via their API. Because of this, QuickBooks Payments customers cannot comply with these rules for transactions processed via their API.

While surcharging and cash discounting may initially seem like viable options for offsetting credit card transaction costs, our deep dive into the topic revealed numerous drawbacks and challenges associated with these practices. From customer dissatisfaction and potential disputes to complex compliance requirements and negative perceptions, we believe that the risks outweigh the benefits.

We believe that budgeting the cost of credit card transactions into your pricing is generally the best approach. However, there are times where an amount may be so large, perhaps in the tens of thousands of dollars, where the potential credit card transaction fee doesn't justify the time savings. For those cases, Novi allows you to set a limit on the size of a credit card payment.

The Card Schemes have published rules related to surcharging and convenience fees. It’s tricky to play in the space compliantly. The difference between cash discounting and surcharging can be a little semantical. Visa in particular has been cracking down on violations that include, but are not limited to:

When you think of cash discounting, think of it in terms of a gas station where the cash price and the credit price are clearly disclosed prior to the transaction.

Surcharging isn't allowed everywhere. Currently, there are laws limiting surcharging in Colorado, Connecticut, Maine, Massachusetts and Oklahoma. Please refer to the card brand regulations links for further information.

Dive even deeper by reading the Association of Payment Pro's "7 Things to Know About... Surcharging."