Key Podcast Highlights

  • Do You Give Your Customers a Discount If They Pay With Cash Instead of a Credit Card?
    • Many small businesses do offer these discounts, but Visa is starting to crack down when it’s done unreasonably.
  • What Does Visa Consider an Unreasonable Discount?
    • Visa is considering any discounts above 3% to be unreasonable and against their customers.
    • In fact, Visa is sending out auditors around the country to physically see what small businesses are offering.
    • If you’re in violation, you could be facing a fine up to $25,000. This is part of your agreement with Visa and is in writing.
  • How Should You Make Up Credit Card Fees?
    • Go back over the past couple years and look at what you paid in credit cards fees as a percentage of your total revenues.
    • When you spread those fees out across your revenues, they’re likely pretty small.
    • To make up for them, you can increase your prices a small amount.
    • For example, if you sell a burger for $10, you can instead charge $10 and three cents. Most customers won’t notice the small difference in price.  


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Gene (00:02):

Hey everybody, this is Gene Marks and welcome to another episode of the Hartford Small Biz Ahead podcast. Thank you so much for joining me. This week’s topic has to do with merchant fees on your credit cards. And my question to you is this, do you give your customers a choice? Say you’re running a retail store or a restaurant or any other business, and you tell them, like you’ll give them a discount if they don’t use their credit cards. If they pay by cash, do you do that? A lot of businesses do that. I go down the Jersey Shore a lot and I gotta tell you, I mean, like I think like more than three quarters of the businesses down in the Jersey Shore have signs on the doors saying if you use a credit card, you’re gonna pay X percentage more, or we’ll give you this percent discount if you use cash.

Gene (00:50):

Is that a good practice? Is that not a good practice? Well, for those of you guys doing that, I do have a warning for you. Visa is starting to crack down on merchants that are doing this unreasonably. This is according to a report in from the end of July. Visa has said that they’re gonna start cracking down on merchants that are offering unreasonable discounts. Now, what do we mean by unreasonable? They’re targeting 3%. For the most part, if you say to a customer, “Hey, if you pay by cash, we’ll give you a 3% discount on the price. Or if you use a credit card, we’re gonna charge you 3% more on the purchase.” Visa will pretty much give you a buy on that. They’ll let you go, but that’s where it ends. They consider anything above that to be unreasonable and against their customers.

Gene (01:45):

So if, for example, and I have, I was just in a restaurant the other day, they’re offering a 4% discount if you pay cash. They had a warning that credit card users are gonna pay 4% more on their purchases. Well, the owners of that restaurant, better be careful because Visa could come after them. And when I say come after them, Visa is sending out auditors around the country to physically go to restaurants and retail stores and see what their practices are. And if you’re in violation of this rule, more than once. But if you’re in violation, you could be facing a fine of up to $25,000. This is part of your agreement with Visa. So it is in writing. And listen, Visa isn’t thrilled. Like any credit card manufacturers for their customers to be telling their customers not to use their cards obviously, right? So the credit card people are walking this fine line because they’re dealing with small businesses, they wanna avoid bad PR, but at the same time, they got a business to run and they feel that businesses charging more than a 3% fee for people using their credit cards is being unreasonable. And if that’s the case, they’re cracking…

Gene (02:58):

Down. So what do you do? Well, I got a few bits of advice for you if you wanna make up on these credit card fees. Because I don’t think it’s that hard. It’s really not such a huge issue. For starters, if you are gonna be just flat out saying, if you pay by cash, you’re going to pay less. Or if you use a credit card, you’re gonna pay more. You wanna cap it at 3%. I mean, that’s the given. You don’t wanna get in trouble with your credit card merchants. And by the way, I’m not aware that the other big credit card merchants like MasterCard and American Express or Discover are doing the same thing. But I think 3% is kind of like the number you would target. If you charge additional fees of up to 3%, you’re probably gonna be okay.

Gene (03:39):

But listen, a lot of customers aren’t crazy about that either. I like the fact that you’re giving them an option. In all honesty, who carries cash? I mean, I don’t but I guess I could if I was gonna get a discount and rather than just applying a fee onto a bill, if you’re at least telling your customers, listen, if you do use a credit card, you’re gonna pay a little more, but you don’t have to. And if you don’t use the credit card, you’ll pay that much less. I like that. I like that you’re giving your customers an option to do just that. However, though, do you really have to be doing all of that? I mean, do you have to be risking upsetting your customers?

Gene (04:17):

Do you have to be putting signs up on your walls and or angering your credit card payment providers like Visa? No, you really don’t have to do that. Credit card fees generally range in the 3% area. I get it. Okay. Some store owners and merchants say, no credit card’s allowed unless it’s a minimum purchase of $5 or $10 or $15. In these times where you’re competing against other people and the economy is slow in certain areas, you don’t wanna turn away customers because they prefer to use a credit card. You don’t wanna anger them because you’re gonna charge them an extra fee because they’re using your credit card. My advice to you is to bake it in. All you need to do is go back over the past couple years.

Gene (05:03):

Why don’t you look at what your credit card fees that you paid are as a percentage of your total revenues, when you look at what your credit card fees are as a percentage of your total revenues, I can guarantee you when you spread those fees out across your revenues, they’re pretty small. I mean, I’m betting you, they’re definitely a lot less than 3%. So all you need to do is increase your prices just a little bit. Will somebody pay 3% more for a hamburger at a restaurant or for a Coke? Yeah, of course they will. They don’t even have to know about it. I mean, if you charge $10 for a hamburger and instead you’re gonna charge $10 and 3 cents. I mean, honestly, it’s not a big deal. I mean, most customers aren’t gonna notice the difference. Even if you charged $11 instead of $10, a lot of that’s gonna fly under the radar screen of most customers. So why are you…

Gene (05:56):

Creating drama? Why are you hanging these signs and potentially upsetting your customers, potentially getting in trouble with companies like Visa? Just spread your price increases a small amount over all of the products that you sell, and that way you could turn around and cover your financing fees without calling attention to them and making a big difference. That’s my advice to you. But if you don’t take that advice and you still want to continue to separately charge for people that are using credit cards versus cash, fair enough, man, it’s your business. Just be aware if you’re gonna make that charge anywhere more than 3% on a Visa transaction, you could be getting into big trouble with Visa. So you wanna really be careful. My name is Gene Marks. You’ve been listening to this week’s episode of The Hartford Small Biz Ahead. If you need any advice or tips or help in running your business, please join us at or Hope you got some good information from this little discussion. I will see you again next week with another bit of advice to help you run your business. Talk to you then.

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