Dual pricing and surcharging both offer a way for merchants to offset the cost of credit card processing fees. But which method is right for your business?
When deciding between dual pricing and surcharging, you may partly base your decision on legal concerns. Which states allow dual pricing vs. surcharging? The following guide will help you determine which option is available in your state.
Where Is Dual Pricing Legal?
The good news is that dual pricing is legal in all 50 states. In this pricing model, merchants can create two distinct pricing options: one price for credit card purchases and another for cash purchases.
This is commonly referred to as a “cash discount” program since cash-paying customers get a lower price for the same product or service. And the Durbin Amendment protects the rights of retailers to create such a program in every state, without interference from credit card networks or providers.
Dual Pricing Compliance Standards
Even though dual pricing is legal in all 50 states, credit card companies can still set compliance standards regarding how it is implemented. Specifically, Visa has set forth a series of standards that govern the use of dual pricing models. Merchants must:
- Advertise two different prices on each item
- Use the credit card price as the “official” sale price
- Not frame the credit card price as a surcharge, which is regulated differently
- Comply with the Payment Card Industry Data Security Standard (PCI DSS)
A good rule of thumb is that Visa will allow merchants to offer discounts for cash customers but will not allow merchants to charge additional fees for credit card purchases. Failure to abide by these guidelines can result in fines beginning at $5,000.
Where Is Surcharging Legal?
Is it legal to apply a surcharge to credit card transactions? In this strategy, merchants simply tack on an additional fee for every credit card transaction. So if a product costs $15.00, the merchant might charge $15.50 to offset the credit card processing fees.
To date, surcharging is legal in most states. But surcharges are not legal in the following states and territories:
- Connecticut
- Maine
- Massachusetts
- Puerto Rico
Elsewhere, states may regulate the amount of surcharges, but merchants still have the freedom to add these charges to credit card purchases.
Regulations Surrounding Surcharges
Unless you live in one of the locations listed above, surcharges are perfectly legal. However, you may still face some regulations regarding how surcharges are communicated and processed. These regulations stipulate that:
- Merchants use signs to clearly disclose surcharge fees prior to transaction
- Surcharges must be listed on the receipt along with the dollar amount
- Merchants are limited to a surcharge of 4%
- Surcharges are not permitted on debit cards
These regulations are designed to set limits on surcharges and ensure total price transparency at the point of sale.
Rise Above Credit Card Fees
Regardless of whether you choose dual pricing or surcharging, you need a partner that ensures you stay compliant. The Simpay Select Plus platform offers a simple solution for both dual pricing and surcharges. By using this platform, you can take full control of your business and find ways for your business to rise above credit card fees.
