MasterCard states that “A Merchant must not directly or indirectly require any Cardholder to pay a surcharge … in connection with a Transaction” (Page 114, 5.11.2 Charges to Cardholders, to date – document is constantly updated and therefore pages and paragraph numbers keep changing). If this is not clear enough: “MasterCard rules specifically prohibit merchants from adding a fee for acceptance of MasterCard cards. This is considered surcharging”.

Visa are saying the very same thing: “Visa rules do not allow retailers to charge cardholders a checkout fee for using their cards” and going a further step advising card holders to “report retailers that are charging checkout fees”.

Both Visa and MasterCard base their rules on discrimination laws, as surcharging a shopper paying with a credit card is, in a way, a shopper discrimination based on type of payment. Several US states have accepted the associations’ ruling and outlawed surcharges on credit card payments. These states are: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma & Texas.

So what does this mean? Do the associations and state regulators expect retailers to finance processing fees out of their own pockets? No. Retailers should have their processing fees embedded within their final prices and therefore are allowed to offer discounts for cash and check purchases, as well as for PIN debit cards, as long as such offers are made to all buyers.

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com

Regardless of what you were told, or the ‘as low as’ pricing you were counting on when applying for a merchant account, the actual cost of credit card processing will catch you by surprise each time you will try to figure it out.

Once you start accepting credit and debit cards, you realize that every transaction is unique. There are 123 pages to the MasterCard Worldwide U.S. and Interregional Interchange Rates guide and endless number of rate scenarios. Visa is not much better as can be seen at Visa U.S. Interchange Reimbursement Fees guide, taking into consideration that this guide applies to transactions within the US only.

The credit card associations explain that this pricing structure is a direct result of merchants and regulators demand for transparent pricing. These demands forced the associations to reveal the complexity behind credit card processing. No one doubts the end result – no merchant can see the forest through so many trees.

What could possibly be so complicated, that requires such a complex pricing structure? The complexity exists at ‘both sides of the equation’. Merchants and shoppers (or cards) both carry different sets of risks and rewards, to which the associations relate. Fraudulent transactions are more common online than at the local grocery store. Debit cards lack the credit risk embedded within each credit card transaction. Different card types have different sets of benefits. All these, and much more, are taken into consideration when pricing the cost of processing a single transaction.

Processing a regular Visa card will cost less than processing a Gold MasterCard, which will still cost less than processing an American Express card. Merchants that process in a single step (do the authorization and capture together) will process for less than merchants who are forced to split the authorization and capture, due to physical merchandise location and delivery regulations, making them capture in delay.

And the funniest part – all of the above is the least of your concerns. As long as your merchant account provider uses an “interchange plus” basis, you’re on safe ground. The plus is the element you should negotiate and feel comfortable with. No one is big enough to get a better deal from the associations

Gidi Argov, Founder and CEO
www.CreditCardProcessing-r-us.com