Free Credit Card Processing

Free credit card processing, which involves passing a small fee on to the customer to cover processing fees, is slowly spreading to all business sectors and allows businesses to reduce monthly costs.

Also known as “zero cost credit card processing” and “zero fee processing”, small businesses, and even larger businesses, are starting to evaluate using it as an effective way to reduce their monthly costs without having to increase their prices.

The auto servicing industry, pet care, dry cleaners, dentists and even the food and beverage industries are just a few of the business sectors that can save significant amounts of money by using a program that shifts the credit card processing expense to the customer.

Implementing free credit card processing allows the business owner to pass along the cost of credit card processing to only those customers that pay by credit card, which actually seems like a fair way of apportioning those costs. For instance, it is illegal to pass the cost of processing a debit card on to the customer, so make sure whichever processor you choose for credit card processing, they are using approved software and equipment.

Not all processors will necessarily be able to offer you a turn key solution, as we have found out.  Some processors have a zero-fee processing program, but leave the merchant to do the necessary notice filing with the major credit card brands. Also, make sure they provide you with the appropriate signage for the business to post at the point of entry and at the point of sale. We did our research on a few processors offering zero fee credit card processing and vetted our processor carefully, before recommending this solution to clients. We can offer merchants a solid turn key program, from approved software to correct signage and take the worry out of the whole process.

 Is Free Credit Card Processing Really Free?

Even though it is referred to as “free” it is not completely free of any costs. First, as mentioned above, businesses cannot pass the cost of debit card processing onto the customer, no matter what state the business is located in or what kind of notice they put up. Even if the debit card if processed as a credit transaction, the software we provide in our certified terminal detects if it is a debit card and will not pass any additional costs onto that customer. So, the business will be charged each month for the amount of debit card processing that it does. The other monthly costs involved are PCI compliance fee, account maintenance fee and the software/terminal fee which is about $60.00 per month.

How Much Can a Business Save each Month?

Depending on the size of the business, they can save hundreds or even thousands each month, it really depends on the size of the business, how much credit card volume they are processing each month and ho much debit card volume they are processing each month.

Small Business Example:  A dry cleaning business doing $35,000 per month and paying an effective credit card processing rate of 2.5% would be paying $875 each month in merchant processing costs. Using a free credit card processing program, the costs would be $60 per month, plus debit card processing fees, saving the business an estimated $800 per month, which is $9,600 per year.

Mid-sized Business Example:  A large liquor store doing $125,000 per month and paying an effective credit card processing rate of 2.5% would be paying $3,125 each month in merchant processing costs. Using a free credit card processing program, the costs would be $60 per month, plus debit card processing fees, saving the business an estimated $3,000 per month, which is $36,000 per year.

As you can see, the two examples above show quite a significant savings that can be achieved with free credit card processing. Whether or not this is right for your particular business can only be determined by you, so you need to consider the factors below before making a decision.  

Free Processing Factors to Consider

Can I Test the Waters First?  We allow our business clients to test the waters by trying our free processing program and credit card terminal without a multi-year lockup and without an early termination fee. This allows you to easily try the program before switching to it full time.

Multi-Year Contracts and Early Termination Fees. Be wary of anyone who tries to lock you up with a multi-year contract or early termination fee. Also, if they lease you a terminal, that often ties you up for several years as well.  Even if you are able to cancel the zero-fee processing contract, you may be stuck paying for the terminal for the next three years, which effectively locks you up with that processor as well. The processing contract may be with one company and the credit card terminal lease may be locked-up for three or four years, but with a different company. We have seen this happen numerous times. Once that credit card terminal lease expires, the merchant will then switch, promising never to go back to that processor again.

Amount to Be Saved Each Month. The amount to be saved can be easily calculated as I have shown in the two examples above. Just deduct the $60 monthly fee and estimated debit processing costs you are currently paying from your typical monthly statement and that is how much you will be saving each month.

Is the Processor Providing a Turn Key Solution? Some credit card processors may require you to notify the major card brands yourself, which is one of the requirements of using a free credit card processing program. Other processors may explain to you that another requirement is that you need to have proper signage at you store notifying your customers that you are passing the credit card processing fee onto them if they use a credit card to pay their bill. These programs will require you to do most of the work and you could end up having a problem if you are not following the requirements properly.

We provide one of the few turn key solutions for zero cost credit card processing and guide our clients every step of the way, and beyond. We handle the filing for you with the major card brands and we even provide the signage, so you can be assured you are providing the proper notices to your customer and the credit card receipt is properly itemized. We personally handle your account and do not just hand it off to a 1-800 number.   

Will I Lose Customers? This is a touchy subject and obviously there is a chance you may lose some business as a result of using a free credit card processing program. Only you can answer the question on whether it is right you’re your business. The more loyal your customer base is, the more likely you will not lose much business. You can always test it out for a few weeks to see what kind of customer response you are getting, because we do not require a multi-year contract and we do not have an early termination fee.

Keeping You Up to Date

We were one of the first to start offering this free credit card processing program after tracking it the last few years as things developed in the various states. We continually track the necessary regulatory changes and card association rules, often consulting with legal counsel experienced with electronic payments regulation.   We continually stay in touch with our clients to advise them in the event there are any new changes. We did the same thing when the new EMV chip card guidelines came out and notified our clients to help them reduce their risk of loss from fraudulent card usage.