Zero Fee Processing Definition

Merchant Account Zero Fee Processing Explained

What is zero fee processing? Zero fee processing (often confused with a “cash discount” program) is a pricing plan that adds a fixed surcharge to any transaction that a customer pays for with a credit card. Also called “reverse fee processing” or “free processing,” zero fee processing uses the revenue generated by these surcharges to offset the transaction fees that merchants owe for accepting electronic payments. This has the ultimate effect of passing the cost of payment processing to consumers rather than merchants.

Zero fee processing is subject to certain restrictions due to unresolved legal issues between retailers and the major card brands. Specifically, under a zero fee processing plan, surcharges cannot be added to debit cards, cannot exceed 4%, must be announced via proper signage at least 30 days in advance, and are outright illegal in California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, Texas, and Puerto Rico.

Zero fee processing is often confused with cash discount programs, and sometimes the two terms are used interchangeably. However, there is a key difference between credit card surcharge programs and cash discount programs. The surcharges added under a zero fee processing program only apply to credit card transactions, while the surcharges under a cash discount program apply to all non-cash transactions. Furthermore, cash discounts have been permitted by Visa and MasterCard for more than a decade and are completely legal as long as merchants provide adequate disclosure of the surcharge and apply it to the proper transaction types. Zero fee processing, on the other hand, comes with additional restrictions that have been outlined above.

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I'm a former credit card processing sales director who left the industry to start my own a small business. From the time that I starting working in the merchant services industry to when I left to write about it, I've been on the pulse of payments for nearly 15 years. It didn't seem fair to keep this insider knowledge to myself, so decided to build this website to help you research which providers to use and how to save money on rates and fees. I've reviewed hundreds of companies, read thousands of user reviews, and learned the pricing tricks of every provider. If you have questions about credit card processing, you can find the answers here. Simply scroll to the top of the page to find the search bar. You can also message me if you need any guidance.

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