Cash Discount Program

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What is Cash Discount and Sucharge Program?

A Cash Discount program is a method of implementing a service fee to all customers who pay with a card, while providing a discount to those who pay with cash.

Cash Discount programs are legal in all 50 states per the Durbin Amendment (part of the 2010 Dodd-Frank Law), which states that businesses are permitted to offer a discount to customers as an incentive for paying with cash. While this type of program has been used by gas stations for years now (displaying cash prices), there is still confusion on how to implement a Cash Discount program the right way.

Guidelines and Requirements

The card associations have strict guidelines on how a Cash Discount program must be implemented.

The posted prices are considered cash prices and the signage allows for a fee if the payment is not made with cash. In order to be compliant, merchants with a Cash Discount Program need to display the Base Amount of the transaction, the Cash Discount, and the Total Cost of the transaction on the customers’ receipt (see below).

The essential steps:

Correct signage must be posted at the door.
The amount of the added service fee must be clearly displayed on the receipt.
Offering your customers a cash discount verbally. Even though gas stations post different prices, as a retailer it is not necessary to do so.

How it works?

The card associations have strict guidelines on how a Cash Discount program must be implemented. The essential steps being:

$100 sale

The customer is ready to pay, and enters their card into the terminal. They will then be promoted to confirm the amount with the Cash Discount applied.

$100 + 4% customer fee = $104

The transaction will go through on the terminal, charging the customer a 4% fee on their transaction.

$104 - 3.846% merchant fee = ~$100 settled

The 4% will cover the merchant’s credit card processing fees, practically eliminating the credit card processing fees.

Surcharging vs Cash Discount

Surcharge or convenience fees are different from cash discount program. A surcharge is when merchants increase the cost of purchases made by credit card. Sometimes the program gets confused with surcharging, but here’s the difference between the two:

Surcharging

Surcharge or convenience fees are different from cash discount program.
A surcharge is when merchants increase the cost of purchases made by credit card.
No cash discount fees or surcharges are allowed on PIN-based debit transactions.

Cash Discount

A cash discount program (aka cash discounting) relates to the methods merchants apply in their business to pass the costs of accepting credit and debit cards to their customers or cardholders.
The merchants raise their prices through simple conspicuous signage in the business location and offer discounts to the customers.

Reduced Fees

The main benefit relates to eliminating or reducing card-processing fees with credit cards accepted.

Easier to Implement

Apart from being more accessible to achieve, the program is also easier to explain to customers.

Encourages Cash Payment

Even though most individuals prefer card payments, cash discounts incentivize them to use cash instead of debit cards.

Chargebacks Reduction

After reducing the number of customers using credit cards in your store, chargebacks will also diminish.