By Harvey Silverman, Contributor, Golf Business | Silverback Golf Marketing
The long-awaited white paper on merchant processing, “Deck of Cards – How to Ace Credit Card Processing and Save Money,” is out, and I encourage you to read it. Maybe the most important and potentially controversial chapter is the third, “Surcharging.” It contains so much critical information that it warranted its own education session at the recent NGCOA Golf Business Conference. For those who missed it, here is the executive summary.
I’ll lead with my opinion – don’t surcharge. The significance of my opinion will be revealed later, enhanced by recent legal developments in two key states and potentially the entire country.
Deep in the NGCOA archives is an article about surcharging in the Nov./Dec. issues of “Golf Business Magazine.” The title, “Credit Card Surcharges – Bottom Line Winner for Owners,” implies an opposing view of what I’ll explain below.
Laws, rules, and regulations govern if and how you can surcharge, and the penalties are daunting if caught surcharging illegally or incorrectly. The above article quoted an owner who “set his surcharge at 3%” to cover the Visa and MasterCard swipe fees “plus a little.” Another admitted to charging a 3.5% surcharge, likely more than its contracted processing rate. In both instances, such surcharges are illegal – a business cannot profit from surcharges. A surcharge cannot be more than the contracted processing rate, which is generally less than the monthly effective rate.
That’s one issue. But the crux of the problem lies within golf’s management system technology to be able to distinguish between:
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A debit and a credit card. It is illegal to levy a surcharge on a debit card. It’s a FEDERAL violation.
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An American Express card from a Visa, MasterCard, or Discover card. It is against Amex’s contractual regulations to levy a surcharge on an Amex transaction other than for a utility, government agencies, educational institutions, and rental establishments (i.e., real estate rentals).
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A Visa from a MasterCard or Discover card because the surcharge limit on Visa is 3%, and 4% on the others.
Here’s one I missed in my research: a new law in New York state that took effect this past February 11. It’s similar to a law taking effect July 1 in California and possibly nationally with H.R. 2463, or by FTC regulation. It does not forbid surcharging, but it makes it really difficult to do and has substantial fines for offenses. The two graphics below spell it out. New York golf course owners and operators – take note!
What’s happening is a consumer-led movement for transparency, to see and know exactly how much we’ll pay if a credit card is used instead of cash. It’s a movement that’s maneuvered around being unable to outlaw surcharges – and it’s working.
What does it mean for golf courses? Lots of headaches if you are or hope to surcharge.
First, if you have one, your online tee time booking engine and rates page will be required to display two prices – one for cash/debit/Amex and one for other credit cards. I’ve queried the major GMS companies, and none has replied with this capability. In fact, one company is advising their New York client not to surcharge – stop doing it now, and don’t if thinking about doing it. Or, you can use one of the other options shown below if your GMS can abide.
Then, everywhere else where prices are displayed will require the same treatment, like on food and drink menus or gift cards in the online store. If your beverage cart accepts bank cards, the attendant must quote two prices when someone asks, “How much for a Bloody Mary?”
Again, all this happens in New York and California in a few months, and likely nationally either by law or FTC regulation. The solution? Don’t surcharge. As a distinguished NGCOA member lamented, “It’s just 44 cents a round. It’s a cost of doing business. I’ll build it into my fees and prices.”
And you should, too.
Last note: There is a lot of misinformation found on multiple websites. And now, a primary GMS provider, also a proprietary merchant processor, has released a “Surcharge Notice and Release,” requiring clients to agree and sign. It has one major error, an example of misinformation that’s easy to find and believe. It quotes the “U.S. Credit Surcharge cap” as 3% of the total transaction amount. The federal cap is 4%, but is 3% on Visa transactions (effective April 15, 2023). It also recommends training employees to physically inspect and identify debit cards (or to ask the cardholder to do so) to not erroneously surcharge a debit card transaction. Nothing is wrong with that recommendation, but I question the practicality of it. And card-not-present transactions? Do you see the problem?