Saving On Credit Card Processing Without Switching Providers
Merchant Cost Consulting analyzes your payment processing statements to find any hidden junk fees or exorbitant rates and estimate how much they can save you per month. They will renegotiate your agreement for you, so you don’t have to switch processors to get immediate savings.
Charging customers extra to cover the cost of credit card processing is gaining steam. Find out if it's right for your business (and why customers don't always like it).
Frank has been writing about payment processing and business services since 2015. He is a retired Air Force officer and a former practicing attorney. He has a Bachelor of Science degree in Psychology from The Pennsylvania State University and a Juris Doctorate degree from the Ventura College of Law.
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Frank KehlFrank has been writing about payment processing and business services since 2015. He is a retired Air Force officer and a former practicing attorney. He has a Bachelor of Science degree in Psychology from The Pennsylvania State University and a Juris Doctorate degree from the Ventura College of Law.
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Chris has been writing about small business topics since 2003. He has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida.
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Chris MotolaChris has been writing about small business topics since 2003. He has been featured in Fox Business, ABC News, Yahoo Finance, GoBankingRates, Newsweek, BizJournals, and other publications. He has a Bachelor’s of Arts in English Writing Arts from SUNY Oswego, and a Masters of Science in Interactive Media from the University of Central Florida.
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In recent years, “no-fee” or “zero-cost” credit card processing has become increasingly popular with small businesses due to steadily rising interchange fees and a relaxation of laws that formerly prohibited the practice. These services can be very tempting to a cash-strapped business that pays hundreds or even thousands of dollars every month to be able to accept credit cards.
Unfortunately, these programs — as you might well suspect — aren’t really free.
Instead, they transfer some (usually not all) of the cost of accepting credit cards onto your credit card-using customers. You’ll often hear the terms “surcharging,” “zero-fee processing,” and “cash discount” used to describe these programs. However, they’re not all the same thing. Knowing the subtle differences between one program and another is critically important, as not all programs are legal in all jurisdictions.
In this guide to “no-fee” credit card processing for small businesses, we’ll profile several of the top credit card processing companies that offer zero-cost (or nearly zero-cost) credit card processing programs. We’ll also discuss the various programs that allow you to pass credit card processing costs to your customers.
The Best Free Credit Card Processors For Small Businesses
Our preferred providers for no-fee processing offer honest, transparent pricing and excellent customer service, while not requiring you to sign a long-term contract.
Here are brief profiles of the best free credit card processors that offer surcharging or cash discount programs:
Offers fully compliant credit card surcharging, legal in 48 states & Canada
No long-term contract or ETF
24/7 customer support
Cons
No POS integration
Monthly account fee can be high
Why We Chose CardX by Stax For Surcharging Compliance
Credit card surcharging can be difficult to implement legally, and even if you try your best to do everything on the up-and-up with your surcharging program, you might potentially mess up and get your business into trouble.
The benefit of CardX by Stax is that the provider handles all of the surcharging compliance requirements, so you can rest assured that your surcharging program is implemented legally.
CardX takes care of compliance requirements such as registering your business with each of the card brands, ensuring debit cards are not surcharged, showing the surcharge as a separate line item on your receipts, and others.
If you want to make sure you're surcharging legally, CardX is an excellent choice with solutions for applying surcharges for online or in-person transactions.
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Pros
High-risk specialist
Reasonable rates and fees
Free credit card terminal with each account
Cons
No publicly disclosed pricing
A long-term contract required for some high-risk industries
Why PaymentCloud Is The Best Zero-Cost Choice For High-Risk Businesses
One of the best merchant account providers for high-risk businesses that we’ve found is PaymentCloud. This provider offers its surcharging programs for merchants in all 48 states where the practice is currently allowed. PaymentCloud can help you with the necessary signage and reprogram your equipment to automatically apply the surcharge whenever a credit card gets used for payment.
As an alternative to surcharging, PaymentCloud can help you implement a cash discount program at your business.
Unlike many high-risk providers, PaymentCloud doesn’t charge an application fee when you first set up your account. PaymentCloud also has a great reputation among its merchants for top-notch customer service and technical support.
PaymentCloud Features
PaymentCloud serves both low-risk and high-risk businesses but specializes in getting merchant accounts approved for a wide variety of high-risk industries. The company offers the following primary features:
Free credit card terminal available with each account
As is the case with most high-risk credit card processors, PaymentCloud’s contract terms and processing rates are all highly variable. You’ll have to contact the company and obtain a quote for your business to see what kind of deal the company can offer you.
As mentioned, PaymentCloud does not charge an account setup fee.
What To Watch Out For
Because high-risk credit card processing is so much more expensive than it is for low-risk merchants, be aware that PaymentCloud’s surcharging program may only partially cover your transaction processing costs. Also, high-risk merchants are more likely to have to agree to a long-term contract, depending on the bank or backend processor that underwrites your account.
Choose PaymentCloud If...
You want to implement credit card surcharging (or offer a cash discount program), and you’re in a high-risk industry that makes it difficult to get approved for a merchant account.
Month-to-month billing with no early termination fees
Discounted pricing for high-volume & qualified nonprofits
Outstanding sales transparency & highly ethical business practices
Cons
Not recommended for businesses processing less than $10,000 per month
No support for high-risk or international merchants
Why Dharma Merchant Services Is The Best Zero-Cost Choice For Nonprofits & High-Volume Businesses
Dharma Merchant Services has long been one of our favorite providers due to the company’s remarkable transparency and commitment to sustainability and social responsibility. Dharma offers a surcharging program called MX Advantage for Surcharging, which comes included as an optional feature with its MX Merchant integrated payments platform.
Unlike other providers offering “free” credit card processing, Dharma doesn’t impose inflated processing rates for the service. Your customers will pay the same reasonable interchange-plus rates that Dharma charges merchants on its traditional plans. High-volume businesses and nonprofits in particular can benefit from this program, as the company already offers discounted processing rates to qualifying organizations.
In the case of nonprofits, customers will be more understanding about paying a surcharge when they know that more of their donation will actually go to the cause they’re supporting rather than covering operating expenses.
Dharma Merchant Services Features
In addition to being one of the most ethical and transparent providers in the processing industry, Dharma Merchant Services offers a complete line of services for small and large businesses. Here are the highlights:
Full-service merchant accounts through TSYS
MX Advantage For Surcharging integrated payment platform
MX QuickPay virtual terminal
Dejavoo Z11 terminal for in-person transactions
Integration with MX Payment Links, MX Invoice, and MX Quickbooks Sync
Dharma is a great deal for high-volume businesses, but it does not accept any high-risk industries. If you’re turned down for an account with Dharma, the company will usually refer you to PaymentCloud. Also, Dharma only works with US-based merchants.
Choose Dharma Merchant Services If...
You run a high-volume business or a nonprofit, and you want to lower the cost of accepting credit cards to ensure that more of your donations go to supporting your organization’s mission.
Get a free Clover Go card reader from National Processing when you sign up. Claim your card reader.
Pros
Free month-to-month plans
Clover devices available
Some high-risk businesses supported
Cash discount program offers benefits over surcharging programs
Cons
High-risk businesses may have a long-term contract
Monthly fee applies if you process less than $3K/month
Why We Chose National Processing For Low-Volume Businesses
National Processing offers an affordable zero-fee cash discount program for small businesses, including those who only process a few thousand dollars per month. There is no fee to use the program unless you process less than $3,000 monthly, and even that fee is only $30. With that being said, higher-volume businesses can also save money in processing fees by using National Processing's cash discount program.
In addition to low, transparent pricing, National Processing has excellent customer service, can accomodate some high-risk businesses, and offers multiple terminal options, including Clover Flex if you don't mind spending a little more for a quality smart terminal.
Because NP offers a cash discount program rather than a surcharge program, it's easy to implement, and it's also easy to switch to a traditional plan, which National Processing also offers, if cash discounting doesn't work out. You can also apply a customer surcharge to debit cards (which is not the case with surcharging).
National Processing Features
Cash discount and traditional flat-rate pricing plans
Clover equipment available
Online and in-person payments supported
Full-service merchant account (most $0/month processors like Square and PayPal only offer aggregated accounts)
High-risk processing available for some indsutreis
National Processing Pricing
National Procesing’s cash discount plan pricing is as follows:
Businesses pay $0/month, except for months in which they process less than $3,000, in which case they will be charged $30 for that month
Customers pay 3.99% on credit card and debit card transactions
Businesses pay 0% on credit card and debit card transactions
What To Watch Out For
In some cases, National Processing may offer a free terminal — that comes with some strings attached, such as a multi-year contract. If you accept a free terminal, make sure you read your merchant services agreement carefully to ensure you know what you’re getting into.
Choose National Processing If...
You have a new or low-volume business and want to try out cash discount program without committing long-term.
Month-to-month billing with no long-term contracts
Fully transparent pricing
Excellent customer support
Cons
Accepts US-based merchants only
Not available to high-risk merchants
Why VizyPay Is The Best Zero-Cost Choice For Merchants Seeking Flexible Pricing Options
VizyPay offers both traditional interchange-plus pricing and a cash discount program that passes the cost of credit card processing onto your customers. VizyPay also offers a "hybrid" program that imposes a customer fee on credit card payments, while leaving the merchant responsible for debit card processing charges.
Refreshingly, VizyPay admits that its hybrid program will only save you 40-60% of your overall processing costs. That's still a significant amount, however, and with the company's choice of cash discounting and traditional merchant-funded processing programs, you'll have plenty of options if it turns out that passing on fees to customers doesn't work well for your business.
VizyPay Features
Month-to-month billing with no long-term contracts
Offers SwipeSimple mobile card processing app & card reader
Offers BLogic, and Clover POS systems
Virtual terminal included with each account
Offers choice of Traditional, Cash Discount, or Hybrid pricing plan
VizyPay Pricing
Cash Discount plan fees:
$25/month for merchants processing less than $5,000/month
$50/month for merchants processing $5,000 to $10,000/month
$99/month for merchants processing over $10,000/month
Customer pays 3% on credit card and debit card transactions (Business pays 0%)
Hybrid plan fees:
$25/month flat fee for merchant
Customer pays 3% on credit card transactions (Business pays 0%)
Business pays 1.5% + $0.25 on qualified debit card transactions (Mid Qualified cards 2.50% and Non Qualified cards 3.50%) (Customer pays 0%)
VizyPay’s hardware pricing is kind of on the high side, especially if you choose to pay monthly instead of purchasing the equipment outright. The monthly cash discounting fee can also cut into your savings from implementing cash discounting.
Choose VizyPay If...
You want to try cash discounting but would like to have the flexibility to revert to a traditional pricing plan if it’s not beneficial to your business.
Merchant Maverick has been researching the payment processing industry since 2009. Our writers have reviewed hundreds of credit card processors, merchant account services, and mobile payment apps, evaluating each provider carefully on several different metrics.
Weighted Rating Breakdown
Fees & Rates 35%
Contract 20%
Products & Services 15%
Sales & Advertising Transparency 15%
Customer Service 10%
User Reviews 5%
When comparing different payment processing companies and applications to one another, we consider numerous data points. Our experts start by comparing credit card processing rates, the presence of additional fees, contract length, sales practices, and the presence or absence of additional features and services, like point of sale software. Each provider is judged on its own merits and how well it stacks up to industry standards; then it is weighed against the other providers on the list.
We spend an average of 10-15 hours researching and updating each one of our lists, making sure every company or application included meets our internal standards for quality and reputation. Any list of recommended payment processors on our site might contain a mix of standard merchant accounts, third-party payment processors, mobile payment devices, and high-risk payment processors, depending on what our expert feels is the best fit for certain scenarios or business types.
For additional details about Merchant Maverick’s review and rating processes, please refer to any or all of the following methodology pages:
Zero-fee credit card processing is a pricing strategy that passes most (or all) of your credit card processing rates and fees onto your customers so that they pay the processing fees, not you.
Zero-fee processing can involve either surcharging credit card payments, i.e., charging customers who choose to pay with a credit card an extra surcharge, or offering a discount for customers paying in cash, i.e., a “cash discount” program.
Note that credit card surcharges cannot exceed 4% of the purchase price (3% for Visa credit cards and just 2% in Colorado) or the actual processing cost, whichever is lower.
Why Consider A No-Cost Credit Card Processing Program?
Free credit card processing usually uses software add-ons to allow your payment gateway, virtual terminal, countertop terminal, or point of sale (POS) system to detect when a credit card is used and automatically apply the appropriate charge to the purchase price. If you’re using a cash discounting program, the same software can be used to apply the discount for customers using other payment methods.
Note that such programs usually only pass on processing fees for credit card transactions. All additional fees associated with maintaining a merchant account, such as account fees, PCI compliance fees, credit card refund fees, etc., are not covered. Additionally, there’s frequently a flat monthly fee that you’ll have to pay for the program itself. As usual, nothing in the credit card processing industry is truly free.
While the idea of saving money on your processing costs is certainly appealing, there are many potential downsides to consider. Credit card surcharging, in particular, is likely to depress sales as customers who don’t want to pay the surcharge will take their business elsewhere. Customers who are unhappy about paying extra and believe that you’ve implemented the surcharge incorrectly may even file a complaint with the office of their state’s Attorney General or report your business to their credit card association.
Here’s a summary of the benefits and risks of free credit card processes:
Pros
Eliminates some or all processing costs
Improves predictability of cash flow forecasts
Cons
May require an additional monthly fee
Does not eliminate incidental fees (chargebacks, etc.)
Requires adequate signage and notice to customers
Likely to lower overall sales volume
May result in legal liability if not implemented properly
May result in account closure if not implemented correctly
Credit Card Surcharge vs. Cash Discount Programs
Credit card surcharging is charging the customer a fee when they choose to pay with a credit card. This fee cannot exceed 4% and cannot be applied to debit card transactions. Surcharging is legal in 48 states, provided that your business follows proper surcharging compliance protocols such as notifying the card networks of your program. Specialized payment terminals are also required.
With cash discounting, your advertised prices include a small extra amount to cover credit card processing costs. However, customers paying with a different form of payment, such as debit cards, cash, checks, or ACH transfers, will receive a “cash discount” or refund of this extra amount when they check out.
Unlike surcharging, cash discounting is legal in all 50 states (and Canada). Cash discount programs also allow merchants to charge customers a fee on debit cards. Cash discounting programs are generally easier to implement, and they’re also more palatable for your customers.
Both cash discounting and credit card surcharging have strict compliance requirements that you will need to follow in order to use these programs legally. Learn more about cash discounting and credit card surcharging.
Other Ways To Offset Credit Card Processing Costs
Offsetting or lowering credit card processing fees is not about implementing a “one size fits all” solution. For some business types, you may risk losing loyal customers if you make them pay extra to pay with a card.
Here are some alternative methods to save money on your overall credit card processing costs:
Factor In Processing Costs When Setting Your Prices
For years, merchants have simply raised their prices over what they would otherwise charge to account for credit card processing costs. This is the easiest way to recoup processing costs without having to surcharge, but it doesn’t give a discount to customers using other payment methods.
Add A Convenience Fee
A convenience fee is simply a small fee added to the customer’s bill to help defray the costs of credit card processing. Unlike surcharges, convenience fees are always a fixed amount, not a percentage of the sale. While convenience fees aren’t terribly popular with consumers, they’re legal in all jurisdictions and easily implemented. Be sure to check your processing agreements with the major credit card associations for other limitations that apply before you start charging convenience fees.
Switch To A Less Expensive Provider
The sad truth is that most small business owners in the US pay too much for credit card processing. They’re stuck in long-term contracts and pay inflated prices under tiered pricing plans, all while losing money every month through expensive equipment leases and “hidden” fees that they weren’t expecting. If you’re concerned that surcharging will hurt your business, you can still save a significant amount of money by switching to a better, more affordable provider. Our article on the cheapest credit card processing companies can help you find one.
3 Considerations For Implementing Zero-Fee Credit Card Processing
If you’ve come to the conclusion that implementing a surcharging or cash discounting program is the best choice for your business, there are several issues to consider before making the switch. Below are three of the main considerations that you’ll need to take into account before you start this kind of program.
Notice Requirements & Signage
You can’t have a surcharging or cash discount program without providing adequate notice to your customers that they’ll have to pay extra for using their credit cards. Meeting these requirements will entail some cost and effort on your part, although your merchant account provider can usually help you. For eCommerce merchants, “signage” will usually take the form of a banner or popup on your website that explains how the surcharge works.
Local (State-Level) Compliance Requirements
Because many states’ anti-surcharging laws have been overturned by judicial decisions but not formally repealed, figuring out the current state of the law in your jurisdiction can be difficult and confusing. Your processor — or an attorney specializing in small business law — can help.
Anticipated Customer Reception
The worst potential downside to surcharging is that some of your customers will walk out of your store or abandon your website upon realizing it will cost them extra to use their credit cards. Examine what your competitors are doing before implementing surcharging. If they aren’t surcharging, you’ll put yourself at a competitive disadvantage that can ultimately cost you more money in lost sales than what you save through surcharging. Surcharging is an accepted practice in some industries (taxi cabs, for example) but rare in others.
Which Zero-Cost Credit Card Processing Company Is Best For My Business?
We recommend that you approach your current merchant services provider for help if you want to start surcharging. You’ll want a program that automatically breaks out the surcharge and only applies it when permissible. Trying to add a manual surcharge to every transaction is a recipe for disaster.
If you don’t have a processor, all of the above companies provide high-quality surcharging and cash discounting services. The best choice just depends on which one meets your business’s needs best.
Want more affordable processing options? Check out our list of the best merchant account providers for small businesses—some of these vendors offer traditional processing plans, while others provide cash discount and/or surcharge options.
FAQs: Best Free Credit Card Processors
What states do not allow credit card surcharging?
As of this writing, credit card surcharging is allowed in 48 states, although some states impose their own limits on the practice. Connecticut and Massachusetts are currently the only states that do not allow surcharging. Cash discounting, on the other hand, is legal in all 50 states.
Can I apply a surcharge to debit card payments?
No. The Durbin Amendment makes it illegal to add a surcharge to any debit card payment. This restriction applies whether the transaction is authenticated with the customer’s PIN or “run as a credit card” (i.e., without a PIN being entered).
Frank has been writing about payment processing and business services since 2015. He is a retired Air Force officer and a former practicing attorney. He has a Bachelor of Science degree in Psychology from The Pennsylvania State University and a Juris Doctorate degree from the Ventura College of Law.
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Merchant Maverick’s ratings are editorial in nature, and are not aggregated from user reviews. Each staff reviewer at Merchant Maverick is a subject matter expert with experience researching, testing, and evaluating small business software and services. The rating of this company or service is based on the author’s expert opinion and analysis of the product, and assessed and seconded by another subject matter expert on staff before publication. Merchant Maverick’s ratings are not influenced by affiliate partnerships.
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