Zero-fee processing comes in two forms. Both can bring your card costs close to zero, but they follow different rules. Picking the wrong one for your state, or setting it up without the right signs, can lead to fines or a frozen merchant account.
Cash discount programs
With a cash discount, your posted prices include the cost of accepting cards. Customers who pay with cash receive a discount at the register. Because the program is framed as a discount, it is allowed in every state.
- Applies to all card types, including debit
- Requires clear signs at the entrance and register
- The receipt should show the card price and the cash price
Credit card surcharging
A surcharge is a fee added to a sale when the customer pays with a credit card. It is the model most people mean by "passing the fee to the customer."
- Allowed only on credit cards, never on debit or prepaid cards
- Capped by card network rules, generally at 3% or your cost of acceptance
- Banned or restricted in a few states, including Connecticut and Massachusetts
- Must be disclosed at the entrance, at checkout and on the receipt
Which should you choose?
If a lot of your customers pay with debit cards, a cash discount usually saves more, since debit cannot be surcharged. If you operate in a state that restricts surcharging, a cash discount is often the only zero-fee option. If most of your sales are credit and your state allows it, surcharging keeps your shelf prices lower for cash and debit customers.
A quick example
Say a customer buys $40.00 of goods and your processor charges you about 3% on card sales.
| Model | Card customer pays | Cash customer pays | Your fee cost |
|---|---|---|---|
| Traditional | $40.00 | $40.00 | About $1.20 |
| Cash discount (3%) | $40.00 | $38.80 | Close to $0 |
| Credit surcharge (3%) | $41.20 on credit, $40.00 on debit | $40.00 | Close to $0 on credit |
Across thousands of sales a year, that $1.20 adds up quickly. A business with $30,000 in monthly card sales pays roughly $10,800 a year at that rate.
Your disclosure checklist
- A notice at the entrance, before the customer decides to buy
- A notice at the register or on the payment screen
- The surcharge or cash price shown as its own line on the receipt
- The same disclosure on your website checkout if you sell online
- A short, friendly answer your staff can give when customers ask
Mistakes that cause trouble
- Surcharging debit cards. Card network rules do not allow it, even when the customer signs.
- Charging more than the cap. The surcharge cannot exceed the network cap or your actual cost, whichever is lower.
- Calling a surcharge a cash discount. A real cash discount applies to all card payments and is shown as a discount for cash.
- Skipping the signs. Missing disclosures are the most common reason for complaints and processor warnings.
- Signing a long equipment lease. Some zero-fee offers bundle a non-cancelable terminal lease. Ask before you sign.
Setting it up the right way
- Confirm your state's current rules with your provider.
- Choose the model and have your terminal programmed for it.
- Post entrance and point-of-sale signs before your first transaction.
- Train staff on a one-sentence answer for customers who ask.
- Check your first month's statement to confirm fees dropped as expected.
Common questions
What is the difference between a cash discount and a surcharge?
A cash discount lists one price that includes the cost of card acceptance and gives cash payers a discount. A surcharge adds a disclosed fee on top of the listed price, only when the customer pays with a credit card.
How much can I surcharge?
Card networks cap credit card surcharges, generally at 3% or your actual cost of acceptance, whichever is lower. Some states set a lower cap. Your processor sets the percentage in your terminal.
Which states ban credit card surcharges?
A small number of states and territories ban or tightly limit surcharging, including Connecticut and Massachusetts. Laws change, so confirm current rules for your state with your processor before you start.
Do I need to notify Visa or Mastercard before surcharging?
Card network rules have required merchants to notify their acquirer before surcharging. Your zero-fee provider normally handles this registration as part of setup.