One place where readers of The Green Sheet speak their minds about matters of particular importance to ISOs and merchant level salespeople (MLSs) is GS Online's MLS Forum. Among the recent topics explored were white-label iPad solutions, partnering with an accounting firm, the future of Dodd-Frank, PAI's sale to Clearent and surcharging. Following are excerpts from the lively discussion on surcharging:
Mariuz broached the subject by writing, "I am aware that most of the states allow surcharging up to 4 percent. Does your processor have a software for all types of equipment … which would calculate the surcharge amount based on the card type and automatically add it to the transaction? Or is there any software that would enable the merchant to add flat surcharge amount depending of what merchant would choose: 2 percent, 2.5 percent, 3 percent, etc.?
"[D]o you think that surcharging should be legal or should it be banned? NRF is fighting with card brands to make surcharging legal. From my standpoint, I think it would benefit MLSs and ISOs because we could drive the prices up. From the merchant perspective, it also makes sense. But from the consumer not so much. Any input?"
Clearent replied, stating, "The rules behind surcharging are pretty strict, so making sure the POS or terminal follows them is very important. This includes registering as a surcharging merchant. "To play devil's advocate, the worry about surcharging at Visa, et al., is that it discourages card usage. Anything that discourages card usage reduces our revenue. Additionally, surcharging is not allowed on any form of debit per the Durbin amendment, so the question is, how much does it truly benefit a merchant?
"Since this occurs at the merchant level, settlement would show just the total transaction, but the transaction receipt would disclose the surcharge clearly. So, with all this, if we are talking, say, 3 percent, why not just raise prices that amount? Giving cash discounts is allowed in every state, and doesn't require registration. Truth is, until all states allow surcharging, this latter approach is the simplest for merchants to understand and support."
Others emphasized that surcharging is a complex challenge involving registration, printing appropriate language on in-store signage and receipts, and specialized software to separate debit card bank identification numbers (BINs) from credit card BINs to ensure debit card purchases are not surcharged. Also, in 10 U.S. states, surcharging credit card transactions isn't even legal.
Given this, as well as the restrictions on how high surcharges can be, many merchants have been deterred from the practice. It is estimated the surcharge amount typically works out to less than 3 percent. "U.S. merchants may assess a surcharge on credit card purchases that does not exceed the merchant discount rate for the applicable credit card surcharged, "Visa Inc. stated. "In cases where the applicable merchant discount rate exceeds 4 percent of the underlying transaction amount, in no event can the merchant assess a surcharge above 4 percent."
For a Q&A on essential aspects of merchant surcharging, please visit www.visa.com/merchantsurcharging. To see the MLS Forum's full discussion on this and other topics, please register via the Forums link on our home page, www.greensheet.com. And remember we will welcome your comments and questions at firstname.lastname@example.org.
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