Credit card fees are typically the fifth largest single expense for a retailer and can certainly take a chunk out of profits. If you own a convenient store, when a consumer pulls out their check card to pay for a pack of gum, it may be better for you to just give them that pack of gum! If your store has a larger average ticket size, it’s even worse.
At the end of January, 2013, it became legal for retailers in 40 of the 50 states to add a surcharge to credit card purchases of up to four percent to offset credit card processing charges. The new regulations are the result of a settlement following a lawsuit filed against the major credit card companies. As a practical matter, it will be summer or fall of 2013 before the credit card industry and related software infrastructure, will be in place to actually make this possible to implement.
Retail consultant Bob Negen, founder of WhizBang Training and creator of the Retail Mastery System, recently interviewed Guy Wadas of Integrity Payment Systems on his syndicated program to explore the pros and cons of retailers adding the newly allowed surcharge to credit card transactions.
“While it is now legal to charge your customers the additional percentage it costs you to process a credit card, new rules and regulations for surcharge implementation are complex and possibly unfeasible,” said Wadas. “For starters, businesses need to register with Visa and MasterCard and display signage of their intent to surcharge, thirty days prior to putting this into action. The charge, which must be properly identified on the receipt, cannot exceed the lesser of four percent or the equivalent of what the retailer is paying for the processing costs on each particular card. To complicate things further, surcharging is not allowed on Visa and MasterCard check cards, which can equate to more than fifty percent of the transactions in a typical retail establishment. With hundreds of different interchange rate classifications, a retailer would not know what the appropriate rate would be, nor would their POS system have the ability to categorize these, or stop a surcharge when a check card comes through.
Currently 10 states do not allow retailers to impose surcharges. Those include California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. “So if you operate in one of those states, you have no choice in this matter,” said Wadas. And another eighteen states (as of April 1st) are looking to join the ban.
Negen, who consults with hundreds of business owners, questions the wisdom of imposing the surcharge even if it appears to offset one of the largest expense items for most retailers. “I have always preached that you want to make it easy for customers to do business with you and you want to remove as many barriers to sale as possible. In this regard, if you decide to impose a surcharge and your competition does not, this could steer your customers in the wrong direction,” he said.
So, how is a retailer to cope with high credit card costs? Wadas suggested verifying that you are being charged properly. “Integrity offers a free, no obligation, analysis of your merchant account costs. When the correct interchange levels are being passed on to you, you can experience cost savings without any impact to your customer,” he said.
Integrity Payment Systems is a leading card processing company with a special focus on independent retailers. Please call us at 866-988-4882 or email Save@IntegrityPays.com should you have questions about the new surcharge rules, or if you would like to receive a free, no obligation analysis to verify if you are being charged properly by your current credit card processing provider.
Integrity is recommended by WhizBang Training and Bob Negen. “I have been to their offices and have researched others in this area and can say that we are very confident recommending them to all of our retailers.”
WhizBang Training can be reached at:
233 Washington Ave. #213
Grand Haven, MI 49417
Toll Free: 1-800-842-1660