Dual Price Processing: Debunking the Myths
8 Common Misconceptions About Dual Pricing
In the evolving landscape of payment processing, dual pricing has emerged as a powerful tool for merchants. Despite its growing popularity, many misconceptions persist about its legality, implementation, and customer reception. This blog aims to debunk the common myths surrounding dual pricing, providing clarity and insight into why this pricing model is both legal and advantageous for businesses.
Myth #1: It’s Illegal
Due to the backlash against surcharging and cash discounts from federal, state, and card brand regulations, some believe dual pricing falls into the same category. However, the payment program is legal in all states and complies with card network regulations, provided that merchants properly disclose the pricing to customers. Key requirements include proper signage and transparent communication of the dual pricing model, ensuring that customers are fully aware of the price differences based on payment methods. Legal precedents and regulations have increasingly supported dual pricing as a viable method for merchants to manage credit card processing fees while offering customers a choice in payment options.
Myth #2: It’s the Same as Surcharging
Dual pricing differs significantly from surcharging. While surcharging adds a fee to credit card transactions and cash discounts remove a percentage of the transaction for cash payments, dual price processing offers two distinct prices at checkout. This model allows more transparency in pricing and gives customers a clear choice of how they want to pay and how much they want to pay. Unlike surcharging, it is presented as a positive incentive rather than a penalty.
Myth #3: Customers Will Be Upset
Many merchants fear that customers will react negatively to having two prices at checkout. However, when communicated transparently, most customers understand and appreciate the option to save by paying with cash. One of the biggest mindsets a merchant needs to overcome with any alternate pricing program like surcharging, cash discount, or dual price processing, is the fear of losing a small percentage of customers to achieve significant savings on processing fees. Of the three, dual pricing faces the least resistance from customers due to its transparent nature in-store and at checkout.
Myth #4: It’s Too Complicated to Implement
Implementing a dual pricing model can seem daunting, but many payment processors provide simple, integrated solutions that make it easy for merchants to adopt this pricing strategy. Providers of the service offer equipment and gateways that come pre-enabled to support two prices at checkout, with easy reconciliation and reporting.
Myth #5: I Have to Show Two Prices on All Products and Services
Some merchants prefer to update their pricing to show two distinct prices either through price tags or menu boards, but it is not necessary to run a legal dual pricing program. If only one price is displayed on merchandise, it must reflect the card price. The dual pricing model must also be explained through signage at the store entrance, at checkout, and throughout the store. Technology must be enabled on terminals so that both the credit and cash price options are displayed at checkout. Staff should be trained to explain the dual pricing model at checkout.
RELATED BLOG: No Fee Payment Processing: The Difference between Surcharging, Cash Discounts and Dual Pricing
Myth: I Will Lose Money on Debit Transactions
Some believe that a cash price must be applied to debit transactions, costing the merchant money. In reality, with a dual pricing model, the treatment of debit transactions can vary depending on the business’s policies and the payment processor’s setup. Generally, businesses have several options:
- Standard Price (Same as Credit Card): Some merchants treat debit transactions the same as credit card transactions, applying the higher, standard price. This simplifies the pricing model but does not incentivize debit card use.
- Cash Price: Alternatively, merchants may offer the same cash discount to customers who use a debit card. This can encourage debit card use, which often incurs lower processing fees than credit cards.
- Hybrid Approach: Some businesses adopt a hybrid approach, where debit transactions incur a smaller fee than credit cards but still benefit from a partial discount compared to cash payments. This recognizes the lower cost of processing debit transactions while still distinguishing them from cash transactions.
Regardless of the chosen approach, it is crucial to clearly communicate how debit card transactions are treated within the dual pricing model. Signage, verbal explanations, and clear receipts can help ensure customers understand the pricing structure. This treatment should be consistent in both card-present and card-not-present situations. Ultimately, the handling of debit transactions in a dual pricing model should align with the business’s goals, customer expectations, and compliance with legal and card network requirements.
Myth #6: Only Small Businesses Use It
Dual pricing is beneficial for businesses of all sizes, not just small ones. Larger enterprises, franchises, and wholesale businesses can also reduce their processing costs and offer more payment flexibility to customers. Recent years have seen a rapid increase in the adoption of dual pricing by large businesses as they strive to combat inflation and reduce costs.
Myth #7: It’s Difficult to Communicate to Customers
Proper signage and staff training can effectively communicate the dual pricing model. Clear explanations and visible pricing help ensure customers are informed and understand their options.
Myth #8: It’s a New and Unproven Concept
Dual pricing has been used successfully by various types of businesses for years. It is a well-established practice that helps merchants manage costs while providing value to customers.
Conclusion
Dual pricing is a powerful tool for merchants looking to manage credit card processing fees while offering customers more payment flexibility. By debunking common myths, it becomes clear that dual pricing is legal, distinct from surcharging, and well-received by customers when communicated transparently. It’s not overly complicated to implement, doesn’t require showing two prices on all merchandise, and offers flexible options for handling debit transactions. Businesses of all sizes can benefit from dual pricing, and with proper communication and training, it can be seamlessly integrated into existing operations. Far from being a new or unproven concept, dual pricing has a track record of success, helping merchants reduce costs and enhance customer satisfaction. Embracing dual pricing can lead to significant savings and a more transparent, customer-friendly pricing strategy.
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