Learn about Cash Discounting

What is a cash discount program?

Some background info: In most cases, when a customer pays by credit card, you — the merchant — are responsible for a credit card processing fee. One way small businesses can offset this fee is by offering a cash discount. This incentivizes customers to pay with cash instead of a card by giving them a percentage off the published price of their purchase. But before you go advertising this to customers, you first need to increase your prices by a few percentage points. By raising the price of each item, the customer discount won’t affect your margins, and you won’t pay any extra fees on the transaction. Even better, if your customers still pay by card, the price adjustments you’ve made help to offset the processing fees.

It’s a win-win. 

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Wait, isn’t this the same as a service fee or surcharge?

There’s a common misconception that adding a service fee to a card transaction creates a cash discount, but that’s actually considered a surcharge. For both surcharge and cash discounts, the price published on your menu, price tags or wherever else should reflect the amount owed if the item is purchased with a credit card.

So, what’s the difference?

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Surcharge

Customers pay the published price plus an additional fee when paying with a card. 

• Prohibited in 10 states and certain provinces

• May require a legal consultation to determine if your municipality allows the practice

• All card brands must be notified

• Cannot exceed 4% of the transaction in America and 2.4% in Canada

• Surcharging on prepaid cards is forbidden in Canada, debit card restrictions may vary

• Canadian merchants cannot apply a surcharge in addition to any other service or convenience fee for the same transaction

• Signage detailing surcharging practices required in Canadian establishments

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Cash discount

Customers are offered a percentage off of the published price when they pay with cash instead of a card.

• Not prohibited in any state, though restrictions vary by province

• Requires no additional legal consultation

• Less regulated than surcharging, though stricter in certain provinces

• Signage detailing cash discounting practices in your establishment is required

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How does a cash discount program work?

Let’s imagine someone ordering a burger at a location that offers cash discounting. This will give you a better idea of why your customers might be more inclined to ditch card payments, while also giving you a look at how the process works on your end.

Here’s the breakdown: