Jimmy Moore has spent more than two decades inside the payments industry, first at Heartland Payments and NCR, now as co-founder and CEO of FLO Business Solutions, a payment processing, POS, payroll, and HR company he launched in 2021. Over that time, he says, he and his team have onboarded more than 20,000 businesses and managed over $1 billion in annual processing volume. That vantage point has given him a close view of a trend accelerating across restaurants, retailers, trades, and professional practices: passing card costs along to the customer, done the right way.
The Problem: Fees Are Eating Margins, and Businesses Don’t Know How to Pass Them Along Legally
Every time a customer swipes a rewards card, a business absorbs a cost. Jimmy puts the wholesale interchange cost most service businesses pay at roughly 1.7% to 2.6% before the processor adds its own markup, pushing the real cost to somewhere around 3% to 4%. On $100,000 in monthly card sales, that’s about $3,000 a month in fees. Restaurants feel it hardest: Jimmy points to Outback’s reported 3% net margin over a decade and a half as an example of just how thin the cushion is once payment processing costs are layered on top of food, labor, and overhead.
The Four Compliant Methods, and Where They Differ
According to Jimmy, card brands allow four approaches:
- Surcharging – adding up to 3% on credit card transactions only, never debit. The cap is 3%, not 3.5% or 3.99%.
- Cash discounting – listing the higher, card-inclusive price everywhere (in-store, online, on the menu) and discounting it when a customer pays cash. Jimmy says the typical discount runs 3% to 4%, with 3.99% common.
- Dual pricing – posting two prices side by side, a model gas stations have used for a decade and a half.
- Convenience fees – a flat dollar fee for using a payment channel that’s genuinely more convenient than the business’s established way of accepting payment. This is the one most businesses overlook, and it’s worth understanding on its own terms.
How Convenience Fees Work, and Why They’re Different From the Other Three
A convenience fee applies when a business offers customers an alternative payment channel outside how it traditionally collects payment, for example, a business that normally takes payment in person or by check, but also lets customers pay through an online portal or over the phone. The fee is for the convenience of that alternative channel, not for using a card in the business’s normal course of doing business.
The rules differ by card brand. Visa requires a bona fide alternative channel to exist; a business can’t charge a convenience fee if online or phone is its only way of accepting payment. The fee must be a fixed flat dollar amount, not a percentage, and it must apply to every payment method within that channel, including ACH and debit. It also can’t be paired with a surcharge program. Mastercard permits convenience fees for alternative channels without requiring a flat rate for most merchant categories.
In practice: a restaurant or retailer with an established face-to-face way of accepting payment can run a compliant convenience-fee program by charging a flat fee when a customer instead chooses to order and pay online. It’s a structure long used in higher education, government, tax, and CPA billing, and one Jimmy expects to see more of across service industries going forward.
What Compliance Actually Requires
For cash discounting specifically, Jimmy lays out four steps: register the program with the card brands (typically handled by the processor), give customers 30 days’ notice before the program starts, disclose the program on receipts, and post signage in the business stating that a cash discount is offered.
Why This Matters: The Fines Are Real, and They Escalate
Jimmy says Visa uses secret shoppers to check compliance in the field. First offense: a fine starting at $1,000, with 30 days to fix the problem. If a business is checked again and still isn’t compliant, the fine jumps to $5,000–$25,000, and Jimmy says he’s heard of cases as high as $50,000. He referenced Visa figures, roughly 160,000 businesses fined as of a call from several months prior, with the number almost certainly higher since, though that figure should be verified independently rather than taken as current.
The Other Compliance Layer: PCI DSS
Separate from any fee-passing program, every business accepting cards must complete an annual PCI DSS compliance survey. Skip it, and processors typically charge a monthly non-compliance fee; Jimmy says he’s seen this run anywhere from $50 to $500 depending on the provider. Beyond the fee, non-compliant systems are a real security liability: storing a customer’s card number and security code without proper safeguards puts a business at risk of losing its ability to process cards at all.
The Decision Rule
Before adopting any fee-passing model, Jimmy’s advice is to start with the numbers: pull three months of merchant statements, calculate the effective rate (fees divided by sales), and identify what kind of cards are driving the cost. Consumer cards run cheaper than commercial or rewards cards, and that mix is often outside a business’s control. Only then does it make sense to choose surcharging, cash discounting, dual pricing, or a convenience fee, and to build in the registration, disclosure, and channel rules that keep each one compliant.
