What You Need To Know About Zero Cost Credit Card Processing
Businesses especially retailers who accept credit card transactions lose a big chunk of net profits because of the rising cost in credit card processing. To help a business with its processing fees and to allow it to have bigger profit margins, there are now new programs that have been approved by the federal court in the United States where credit card fee is now shouldered by the credit card holders.
This new process is called Zero Cost Credit Card Processing and it comes in two types of approaches.
The Surcharge Model is intended for organizations and businesses that accept card payments through a website or a central office. This model strictly follows the exact bankcard laws that were approved in the federal court. And in order to be amenable, the business needs to register with a major credit brand and must comply with all the signage and notification requirements.
This kind of approach is also called the Zero Cost Credit and it is allowed in 42 states including New York. By utilizing the Zero Cost Credit, a business is able to process a surcharge fee electronically plus it is able to get the necessary equipment as well as the training and support without extra costs.
At this time, debit cards cannot be surcharged but with Zero Cost Credit program, businesses only pay the minimum $1.25% along with $.025 per transaction. This cost is good enough as it is around 2.5% less than the average credit cards.
Cash Discount Model
The second approach is known as the Cash Discount Model and is ideal for retailers which normally accepts face- to- face credit card transactions. This Zero Fee Cash Discount program is allowed in all the states and it uses a special POS terminal that comes with an integrated software program that allows for an automated card processing transactions.
The Zero Fee Cash Discount Model works by assuming that all your prices will be paid in a check, cash or ACH which means that the sale fee is deducted electronically from your preferred checking account. By using this program, business do not need to register with a credit card brand. However, notification and signage requirements still need to be followed.
With this type of fee processing solution, the business only needs to pay $195 for the special POS terminal which is fully EMV compliant and is compatible with Apple Pay and other related services. This fee already includes shipping.
Similarities and Differences of the Two Approaches
Though the Zero Cost Credit Card Processing Model and the Zero Fee Cash Discount Model are somewhat alike, these programs are really different in terms of procedure and process of how they are conducted. In both programs, some companies offer a free set up and in both models, they will not be charged with an early termination fee in case the situation should arise.
When using this card payment processing program, the business only needs to pay the monthly program fee which is a flat rate of $17.95. In this fee, it already includes the monthly financial statement, PCI charges, installation, full support and training.
Other companies, on the other hand, offers a business with a fixed monthly fee of less than $100, and this package already includes PCI compliance, enables debit card pay, monthly payment transactions, disclosure signage that should be visible to the consumers so it should be placed near the payment counter, software updates to keep you abreast on the latest developments, and approved computer software or credit card terminal (whichever the business is using to accept payment.
By implementing any of the two strategies, a business will get a higher net profit as the credit cardholders will be the ones charged for the service fee.
More than 40 states including New York, New Jersey, California, and Pennsylvania are permitted to use the Zero Cost Credit Card processing solution. This kind of card processing program is definitely beneficial to so many businesses because it allows them to have a larger net profit as they have a lesser cost in terms of credit card payments which gets a huge chunk of their sales.
The 42 states which are allowed to have this type of credit card processing solution should take advantage of this program so they can have bigger earnings. Other states though where this kind of payment solution is not allowed yet are the following: Kansas, Oklahoma, Colorado, Massachusetts, Maine, and Connecticut. Perhaps in these states, owners may try to use debit cards as payments instead of accepting credit to pay for customer transactions in order to save them some costs on cards payment.
Because of this new credit card processing solution, customers pay for the processing in their card transactions which then creates some huge savings for businesses as it reduces monthly processing costs. Through this new method in the processing of credit cards, instead of the business owner shouldering all the costs in credit card payments, the responsibility is passed on to the customer which gives businesses that accept credit cards to have a bigger profit margin because they only need to pay lesser monthly costs.
This new program for using credit cards to pay for customer purchases is really very easy to have because all you need to do is to get approved, and once you get the green signal, you may already register through cards with major brands. When all these are complete, the company where you sign up will provide you with everything that you need such as the proper signage as well as the disclosures that can be used for online or in-store payments.
Once a merchant is already implementing this system, it will be able to accept payments through an approved processing terminal by entering the details on a computer with a secure page for payments or even through a smartphone as the software and payments page are certainly compatible with mobile use. This method then creates a lot of convenience for both the merchant and the shoppers as purchases can be paid in two different platforms.
While this type of program is accessible to many forms of businesses, it is not advised for the ones with a higher risk. Those who cannot or are not allowed to use this program yet always have the option of using a debit card payment to save them some costs.
Businesses that may conveniently use the two approaches are the following:
- auto service stations
- liquor stores
- auto body shops
- dry cleaners
- tow truck operators
- automobile sales
- dental practices
- law offices
- pet care industry
- health care
- business to business sales
- retail shops
Though these industries may use the new payment strategies to save them monthly costs, they can still always use the option of using debit cards for payment transactions. After all, there are still a lot of clients who would prefer to use a debit card as they also try to avoid making additional monthly payments.
What these new strategies or payment solutions are providing is another option for merchants or owners to lessen their cost without having to deteriorate the quality of their services and/ or products. Aside from these new solutions, debit cards are another way to save monthly costs because by using a debit card as payment for purchases, both the merchant and the customer are able to save some amount as there are no additional surcharge and no additional monthly fees. Some traditional clients usually also prefer to pay using a debit card.
If you are a merchant, choosing any of these payment strategies will definitely be beneficial for you as it means an increase in your revenue and will certainly reduce your monthly costs. Selecting the right solution depends entirely on your business needs and your personal requirements.