Is a Zero-Fee Credit Card Processing Program Good for Your Business?

Is a Zero-Fee Credit Card Processing Program Good for Your Business?

Would you like to boost your profit margins by lowering or eliminating your credit card processing fees? If you accept credit cards, you might have heard of “zero-fee credit card processing.” Zero-fee processing can help lower or eliminate your credit card processing fees by passing the costs onto your customers. How does it work?

There are two approaches to zero-fee credit card processing. You can run a surcharge program or implement cash discounts. Let’s look at both options and see if a zero-fee credit card processing program is suitable for your business.

Surcharging Credit Cards

A basic surcharge program adds a percentage to each credit card transaction on top of the product/service price.

For example, a merchant could decide to implement a surcharge of 4% on each credit card transaction. In this case, when the customer wants to use a credit card to make a $10 purchase, they would be charged an extra $0.40, bringing the total to $10.40.

Note: A surcharge cannot be applied to a debit card transaction.

For more information about surcharging, click here to read our blog post “The Dangers of Surcharging on Credit Card Transactions.”

Cash Discount Program

A cash discount program provides discounts to customers who pay with cash. Instead of adding a percentage to each transaction, the prices of all your products/services are increased. When a customer presents cash, they receive a discount at the point of sale.

A $10 product/service would have a price increase to become a $10.42 product/service. If the customer decided to pay with cash, a discount of 4%, or $0.42, would apply, and the customer would only pay $10.

Cash Discount Program vs. Surcharging 

Both a cash discount program and a surcharge program pass the credit card fees on to the customers. The difference is whether you, the merchant, ADDS, or SUBTRACTS from the total. If you ADD to the list price, it’s a surcharge. If you SUBTRACT from the list price, it’s a cash discount.

There’s also a third type of program offered that’s called a “non-cash adjustment” program. All your merchant prices are listed as cash prices in this type of program, and a “non-cash adjustment” fee is added when a credit card is used. This type of program is marketed as a cash discount program, but it’s considered a surcharge program because the fee is ADDED to the total.

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How to Determine Which Zero-Fee Program is Best for You

Now that you know the basics of zero fee programs, here are the first steps that you need to take to help you determine which zero fee program is best for your business:

1. Calculate your effective rate

Your effective rate is the average percentage you pay for each credit card transaction. To get your effective rate take your total monthly fees and divide them by your total processing volume.

Knowing your effective rate will help you determine the fees or discounts you should implement. Most cash discount and surcharge programs have fixed rates around 3.5%-4%. If your effective rate is lower than the fixed rate offered, you will overcharge your customers with a surcharge program.

2. Look at your debit card processing volume

Debit cards are exempt from surcharging. If a large portion of your payment volume is debit card transactions, you don’t want to go with a surcharging program.

3. Determine the price sensitivity of your customers

Some customers can be sensitive to price increases, even when the increase is slight. You know your customers better than anyone. Think about your clientele and the individual customers you know and discern how they would react to a new cash discount or surcharging program.

When implementing a new program, you want to ensure it won’t harm the overall customer experience. If your customers have little to no price sensitivity and like paying with a credit card, a surcharge program may be for you.

To summarize, here are a few good rules to use when evaluating which program is best for you.

You should think about going with a surcharge program if:

• Your effective rate is higher than the fixed rate offered by the surcharge program
• Your debit card processing volume is low
• Your customers’ price sensitivity is low

You should think about going with a cash discount program if:

• Your effective rate is lower than the fixed rate offered by the surcharge program
• Your debit card processing volume is high
• Your customer price sensitivity is high


To provide more clarity, here is a real-world example. Let’s assume the following:

• Your business processes $50,000 in volume monthly
• You pay $1,250 in processing fees each month

You would take your total monthly credit card fees ($1,250) and divide by your total processing volume ($50,000) to get your effective rate. The result is an effective rate of 2.5%.

In this case, it would make more sense to go with a cash discount program and raise your prices 2.5% instead of hitting your customers with a 3.5%-4% surcharge. However, if your processing fees and effective rate are higher, a surcharge program may work for you.

Are you ready to implement zero-fee credit card processing?

If you’re looking for a way to lower your costs and raise your profit margins, BASYS Processing can help! We’ll work one-on-one with you to find the best solution for your customers and your business. Not only will we ensure that you receive the best possible rates, but we’ll also help you with every step along the way!

Fill out the form below or call us at (800) 386-0711 to learn more.

BASYS Processing as a business partner 

Does your current processor understand the unique struggles of your industry? Do they provide great rates and personal customer service? Are they offering solutions to grow your business and being proactive about helping you reduce risk and increase your savings? 

Contact BASYS today to learn more about innovative payment solutions that will save you time and money. We make accepting debit cards and credit cards convenient, safe and affordable. 

BASYS Processing features: 

• A friendly, live voice will answer the phone when you call; no automated phone systems 
• In-house PCI Compliance team to walk you through the process step-by-step, improving security and reducing costs
• Accept payments in person, over the phone or online
• Next-day funding options 

About BASYS Processing 

BASYS Processing provides credit card and debit card processing services, plus solutions that include terminals, virtual terminals, e-commerce, mobile, and point-of-sale, customized to fit any need.  Banks, associations, and software partners depend on us to strengthen their reputations and relationships with their customers by providing remarkable service paired with ultimate flexibility and pricing. Merchants depend on us to make accepting credit cards and debit cards convenient, safe & affordable. BASYS was founded in 2002 on one philosophy: to take care of our merchants, partners, and employees so they never want to leave. We are dedicated to working one-on-one with our customers to design the perfect solution. BASYS is Personal Payment Processing. 

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