I wanted to write a bit about Credit Card fees. Most of the info we usually receive comes in the form of fine print in disclosures from credit card companies that usually wind up in the trash. I also hear chatter from people who might not always have the facts straight. A big misconception that I hear often is that passing credit card fees onto customers is illegal. OR, that it is illegal in some states, but legal in others. There is a lot of misinformation out there, and I wanted to learn the basics so I could pass that info on to our clients, because at NetDeposited, nearly EVERY client of ours takes credit card payments. Most clients are ecomm, and you simply can't run an ecomm business without accepting some form of POS (point of sale) payment.
There are SEVERAL ways to take point of sale, but for this discussion I am speaking directly about credit cards, specifically Visa, Mastercard, and Amex. I did a deep dive and discovered some very important fundamentals:
There are three types of fees that are happening with each credit card swipe.
1. Interchange fees. These make up most of the fee, and interchange fees go to the bank that issued the credit card, such as Chase, Bank of America, or Wells Fargo.
2. Assessment fees. These go straight to Visa, Mastercard, or Amex.
3. Processing fees. These go straight to the processor.
Another thing I learned is that contrary to what you may think, although Visa and Mastercard are competitors, they do not drive down the price of fees. They drive the price UP. Amex, which used to be clear about their fee structure, has gotten considerably more confusing on purpose, for the intention of driving the price up. Consumers can't argue against it if they don't understand it.
Perhaps the most interesting thing I discovered, which is the most confusing element of all, is AM I ALLOWED TO PASS THESE FEES ON TO MY CUSTOMER in the form of a surcharge and the answer is YES. I can pass these fees on to my customer in the form of a surcharge, but I MUST disclose that I am doing so, it MUST be listed as a separate line item, and I am NOT allowed to make a profit. I can charge a fee LESS than my total cost, but I may not charge MORE than my cost. If this rule is violated, anyone who does so risks being fined thousands of dollars by Visa, Mastercard or Amex or worse, have their merchant account suspended.
For me, this cleared up alot of misinformation. I was not aware that this is legal in every single state besides Connecticut and Maine, and even then some federal laws may overrule- it can be very confusing, but luckily there are some companies out there that can help detangle the mess and help you analyze and cut down on those fees if you are processing very large amounts monthly.
Check out https://verisave.com to find out more about how to save on credit card processing fees without switching processors.