June 25, 2011
Question
Ken
With Credit Card companies figuring out more creative ways to charge us to take credit payments, can a company offer 2 rates for service. Say 29.95 by check or 31.95 for credit card billing. Especially since the card is not present during the transaction, the rate the credit card company charges is higher. Gas companies are allowed to do that, I have seen 2 prices at the pump, one for cash and one for credit.
Thanks
Ron
Answer
There are those accepting credit cards that pass on the transaction fee to the consumer [government agencies do this for sure], and others who have a price for credit cards and a lower price for cash sales [gas stations are notorious for this].
So what prevents the alarm dealer from both practices?
The answer, as I understand it, is not a statutory prohibition (though I would not be surprised if there are laws prohibiting it), but a contractual constraint. When you accept credit cards in your business you are dealing not only with the credit card companies, but with Merchants who process the credit card transactions. Thus you will be setting up a Merchant's Account with some company that will process the credit card transactions. The credit card companies will have a transaction charge and your Merchant Account Company will add to that transaction fee, arriving at a total transaction charge. Because you're a little guy and your credit card transactions are insignificant to the Merchant Account Company, and especially the credit card company (try negotiating with American Express) expect to be treated like they are doing you a favor doing business with you. You will be presented with a Merchant Account contract that you will not want to read, and I suspect you won't read.
Naturally both the Merchant Account Company and the credit card company want you to use and encourage the use of credit cards, and they won't want you doing business in a way that discourages the use of credit cards, such as raising credit card prices or discounting cash sales, which amounts to the same thing. So, by contract they restrict you from doing just that. If you violate that provision in your Merchant Account agreement there are penalties and charges, and you risk losing the right to process credit cards.
This is my understanding of how this works. If anyone thinks its different, let us know.