Zero Fee Processing

Zero fee processing is defined as a method of accepting credit card payments while passing the cost of transaction fees on to the customers.
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Zero Fee Processing

Zero fee processing, or free processing, is a way of accepting payments without having to pay transaction fees. Instead of the business paying them, the cost is passed on to the customer. 

The problem with this model is that there is no such thing as “free” payment processing. There is always a cost involved, and someone has to pay it. 

There are two main types of zero fee processing, and they are surcharge programs and cash discount programs. 

Surcharge Programs

Businesses that institute a surcharge program charge additional fees to customers that pay with credit cards. This helps to offset the cost of transaction fees for credit card payments only. It does not impact the cost of products and services paid for using cash, debit cards, or checks. 

Surcharging is designed to make using alternative forms of payment more attractive to customers. But it is still not completely free as many credit card processors would like you to believe. 

There are still transaction fees associated with some forms of payment, including debit cards and mobile wallets like Apple Pay and Samsung Pay. 

Cash Discount Programs

Cash discount programs are similar to surcharging, but they differ in that cash-paying customers receive a discount on their purchases. 

Again, this program is used to encourage customers to pay with cash and not with credit cards. But having it in place may deter business in some cases. 

Implementing Zero Fee Processing

You may have to take certain steps before you can implement zero fee processing for your business. 

  • You may need to post signs and notices about your cash discount or surcharging program. Many states have this requirement in place so that customers are well-informed before making a purchase. 
  • Zero fee processing may not be legal in your state. At the time of this writing, the following states do not allow surcharging: Massachusetts, Connecticut, Kansas, Colorado, and Oklahoma. 
  • Your customers might not want to shop at your store. Zero fee processing can be a big turn-off to customers. You’ll want to consider their responses before you put something like this in place. 

Alternatives to Zero Fee Processing

There are other ways to offset the cost of payment processing. You may want to consider raising your prices slightly to cover transaction fees. 

At the very least, it may be helpful to find a credit card processor that offers low rates that won’t have as much of an impact on your bottom line. 

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