Merchant processing is a separate and distinct line of business from credit card issuing. Every payment card transaction involves: the cardholder, who uses a debit or credit card to pay for a product or service. A bank can be both an issuing bank and an acquiring bank, but banks most often specialize in one function or the other. Most merchants operate within credit card issuer rules and are aware of what can and cannot be done, though the maze of regulations can be confusing. Credit card processing fees can add up to a big expense for merchants. Businesses are allowed to impose a surcharge on credit card purchases made on Visa and Mastercard, under a court settlement that took effect in January 2013. Historically, card association merchant rules have contained anti-steering provisions and “no surcharge” provisions. No credit card issuer may, by contract or otherwise, prohibit a merchant from offering a discount to a customer to induce the customer to pay by cash, check, or similar means, rather than by use of a credit card or its underlying account, for the purchase of goods or services. Merchant services process payments made to the merchant and facilitate the payment of the merchant. (1) A seller or lessor in a sales or lease transaction may not impose a surcharge on the buyer or lessee for electing to use a credit card in lieu of payment by cash, check, or similar means, if the seller or lessor accepts payment by credit card. The Code of Conduct for the Credit and Debit Card Industry in Canada (the Code), which all payment card networks operating in Canada have adopted, sets out several rights that merchants have in relation to their contracts and their statements for payment card processing services. In serving as the medium between the parties, fraud by the merchant services processing payment can cause significant damages to the merchant, … The Players and The Process. Credit card surcharges are legal. For example, Cheryl Lavenhar, owner of Knit — a shop geared to all things knitting — in Roslyn, N.Y., warns, “It’s illegal to say you don’t take a card … ; the merchant, which provides the product or service for a price. ; the issuer, which provides a payment card to a cardholder and usually maintains the cardholder's account. Card associations charge participating merchants a fee for each consumer credit card transaction and the fee varies based on card association and credit card type. merchant or indirectly through agent banks or other third parties. 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