Does free credit card processing exist? - SurChoice

How to Get Free Credit Card Processing – 2020

Today I saw many ads for free credit card processing. Free credit card processing? Sign me up!

Free credit card processing is a clever marketing spin to a credit card surcharge or cash discount program. This is where the fees are passed on and paid by the customer through a surcharge, service fee, or “non-cash adjustment”.

If you are a business owner, I know you can relate to this. Do you remember when you were pricing your product or service? You were so careful. You were competitive, selling a fair product or service at a fair price. Then … you get your merchant services bill…

Hi folks, my name is Dan Paige, and I am a payments expert. I am here today to help answer your questions about free credit card processing and how to get it if it is real.

Before I go too far into detail, if you are a local business looking for free credit card processing, please leave a comment below. Write ”Yes“ if you are and “No” if you are not. You can write more, of course, we would love to see it. I want to use these results for a future guide.

Is Free Credit Card Processing Real?

Free credit card processing - SurChoice
Free credit card processing – SurChoice

I get this question a lot. I like it when people ask me if free credit card processing is real. Sometimes I am so open that it gets me in trouble. When someone asked me if free credit card processing exists, I usually have the same response.

TANSTAAFL. That is always funny when I read that but when I do, I know exactly what it is saying. I know I am not alone in this.

Google: “There ain’t no such thing as a free lunch”. Seriously, Google it!

TANSTAAFL Has been used since the early 1900s. It is used in so many industries. Sports uses it in a manner similar to “no pain no gain”. Science uses it when explaining that energy cannot be created or destroyed, but only changed from one form into another or transferred from one object to another In economics, uses it in regards to opportunity cost.

If products and services are given away for free to an individual or a business, there is still a cost. Even when there is no one to assume the direct costs, society bears the burden (our natural resources).

Even products and services given to individuals for free are not truly free; a company or individual ultimately pays the cost.

Investopedia Article about TANSTAAFL by Alexandra Twin

The same goes for free credit card processing. There are so many companies, banks, organizations involved in a single transaction, someone has to pay the fees…

You wouldn’t expect them all to work for free, right? Besides, there is a lot of costs and risk when it comes to processing, but that should be saved for another time if you are interested in the inner workings of the industry.

How Others are Doing it?

How are others doing it, free credit card processing - SurChoice

There are ads everywhere for free credit card processing. “No Cost Processing”, “Zero Fee Processing”, and “Free Credit Card Processing”.

If you call any of them, ask them if they are really working for free, the answer will be no. The fees are still being paid. Instead of them being paid by the merchant, they are being paid by the customer. This is the part that really bothers me in marketing, if it is no cost or free, why is it that there is a cost?

What there really are doing is the process of surcharging and cash discounting. In other words, it is the process f passing the fee onto the customer.

A surcharge is the process of adding a fee to the price if the customer is paying with a credit card. A cash discount is very similar. However, instead of adding a fee for using a credit card, it adds a fee to all transactions, then discounts if paying with cash.

Is surcharging legal? - SurChoice

Well yes and no! Since 2013, surcharging has been legal and the processors cannot stop you from doing. However, you need to follow very strict rules.

Now, even if you follow the rules, some states banned it. It was about 10 states that had made no surcharge laws. But since then, one by one the laws have been challenged in court and overturned. Now it is down to only 4 states where it is still illegal. Those states are Colorado, Connecticut, Kansas, and Massachusetts. Some states have strict rules to follow such as New York, but the no-surcharge law has been lifted.

There is some push back on the method of Cash Discounting. Many believe it is just a clever spin on surcharging and is breaking many rules in the process of doing it. This is in regard to the Durbin amendment and I will go into detail on that in a different post as it deserves.

How You Too Can Offer Free Credit Card Processing?

How to offer free credit card processing? - SurChoice

That is easy! Utilize one of these companies that are offering such a program. Just make sure to do your homework and verify that they are offering a program that is compliant and not going to get you in a lot of trouble.

For example, if doing a surcharge it needs to follow the rules. The main rules are:

  1. You must register with the card brands.
  2. Each customer must be alerted of the surcharge before the transaction. This is done with signage and or verbal cues at the entrance and at the point of sale.
  3. The merchant cannot profit from the surcharge, they must not charge a fee greater than their cost of card acceptance.
  4. The amount of the surcharge cannot exceed 4%.
  5. The fee must be processed with the original base amount, in a single transaction.
  6. The fee must be itemized on the receipt.
  7. The fee can only be applied to credit cards, no debit cards.

Are they providing software or technology to make sure that your sale follows the rules? For example, a customer may have a contactless card such as Apple Pay, or the card looks like a credit card. Even if they press credit and run it like a credit card transaction, you can be exposed to potential fines and penalties because you are not allowed to surcharge a debit card.

If doing a cash discount, make sure that the provider is willing to help defend you if you are called out by the attorney general or another legal office. I do feel the Durbin Amendment does allow for it, but it is clearly in conflict with the surcharge rules.

At some point, there will be an action or legal battle that will decide which order is to be enforced. When that happens, it will have to change in some manner. If you want to be safe and not have to change later down the line, I would suggest sticking with the surcharge method.

However, if you want to maximize immediate savings, the cash discounting method is looking very tempting.

Should You Offer Free Credit Card Processing?

Absolutely, yes! Of course this is just my personal opinion.

The reason that I am a big supporter may surprise you. It is not because there is a massive savings in there for you. It is not because my clients profit from it. It is because it has the ability of changing what is broken in our industry.

People do not realize how much the merchant spending impacts much of our economy. It impacts how much our merchants profit. It impacts how much our customers spend. It impacts the price of advertisements. It even impacts the price of our food.

There are a few problems in our economic process that I see could use some improvement.

Cost of Rewards

The merchant pays extra for reward cards but does not see any monetary value for accepting that card. Why is it that the rewards that are earned are usually paid for by a merchant who never sees the profit from it?

What I mean by that is if you are earning double miles from your favorite airline for using your card. That card is usually under the high-end interchange bracket because those rewards are expensive. The merchant who took the card is paying for those rewards. Those loyalty rewards are then being used with the airline who we know profits from the mile value, upsells, and brand loyalty.

So I ask again, if I were a merchant, why am I paying for someone else’s rewards? Shouldn’t the extra costs I am paying go to a loyalty program that earns me a repeat customer?

Margin Creep and Inflation

The card brands are known to increase the cost of interchange twice per year. Because of this, a merchant is going to lose margin or have to raise prices.

Our economy is so competitive that there is a low margin in many of our retail and foodservice merchants. To stay in business, they MUST raise prices. Doing this further ostracizes their customers, causing them to shop online or at the big box stores.

Therefore each time there is an increase, effectively everyone has to raise their prices. With a higher cost of living and our wages not increasing, it is theoretically putting stress on our economic system.

The only ones profiting are the banking and financial services.

What If We Said Enough is Enough?

What if adding a small fee to cover the cost of merchant processing?

Cash and debit customers would be happy because there would be no more increases due to interchange hikes. NONE!

Businesses would be happy because they could lower their prices if they want to be more competitive with the big box stores.

The credit card customers would start to understand that the rewards they earn should be paid for by the merchant profiting from them. If they do not want to pay the small fee, they can always use cash or debit.

Just like what happened in the other countries who took on this model, the card brands were forced to lower their interchange. Doing so entice many merchants to turn off the surcharge because it was now affordable again.


There you have it folks. Free credit card processing does exist, just not in the way it sounds.

I am sure that will change some day. Truth in marketing will have it reworded, but how are they going to make it exciting then?

Now is the time if you were ever going to consider implementing a cash discount or surcharge program. Customers are more willing now than ever. Willing to help their favorite merchants sustain and get back on their feet. If this is all it takes, I say give it a shot.

Did I miss anything? Do you have questions, comments, or feedback? Please let me know in the comments below. I will get back to you and your feedback is what motivates me to keep creating new content.

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