Cash Discount. Just the Facts. Ma'am!

Q: What is the Cash Discount Program?

A: The Cash Discount Program is a way for you as a merchant to offset some or all of your current merchant service fees without increasing your overall rates. It is a method of implementing a service fee to all customers, while giving a discount to those who pay with cash. Therefore, your posted rates now become the rate for those who pay with cash. Those customers who pay with cash avoid the services fee and all others will see a line item added to their receipt. It is our proprietary technology that allows this to happen and keeps you within the guidelines of Visa, Mastercard, and processor regulations.

Q: Is it legal to offer a Cash Discount?

A: As Mitchell Katz, spokesman for the Federal Trade Commission, said in May of 2011: The Dodd-Frank law prohibits a payment card network such as Visa “from inhibiting the ability of anyone to provide a discount for payment by cash, checks, debit cards, or credit cards,” said Katz. “Neither surcharging, nor a cash discount is illegal.” Q: Is this some kind of new program? A: No, in fact it’s been around for decades in Europe and is used across the US in gas stations where a cash discount is offered at the pump. Gas stations have been using this program in the US for over 15 years. Many national, state and local governments including the DMV, Secretary of State, Post Offices, Schools, Courts, and the IRS implement a Service Fee.

Q: What do I need to do to make sure I’m using this program correctly in my business?

A: In order to correctly implement a Cash Discount program, you don’t need to change any of your prices – you simply post signage (that we will provide) that states that all transactions now carry a 4% (you have the option to charge 1%-4%, 4% is the maximum) customer service charge. The proprietary technology is provided in conjunction with our hardware and processing partners. However any consumer who pays with cash, will have this fee waived. Your posted prices are your cash prices. Consumers who pay with a method other than cash will see a 4% cash discount fee listed on their receipt at the register. The additional 4% service charge is programmed into your terminal, hence there are no additional steps for you.

Q: I heard that it’s illegal to charge a fee if someone uses a credit card?

A: Until recently, Visa and MasterCard regulations made it clear merchants could not charge more to a consumer who used a credit card over other methods of payment. As a result of a 2013 lawsuit against the card networks, merchants are now allowed to impose a surcharge in all but 10 states and Puerto Rico. We’ll address the surcharge in the next question below. However, there has always been a stipulation in the Visa and Mastercard regs that allow for a discount when paying with cash.

Q: Won’t my customers be upset by this fee and want to go elsewhere?

A: While nobody wants to pay additional fees, more and more consumers are starting to realize just how expensive it’s been for merchants to accept credit cards. By charging a 4% fee on a sales transaction, that’s a small price for customers to pay for the goods and services you provide. And (if paying that fee or Implementing the Cash Discount Program) allows you to stay in business and keep your overall costs lower, it’s a small price to pay. In fact, surveys have shown that over 80% of respondents stated they wouldn’t think twice about paying that amount (only $1.00 on a $25.00 transaction) for the convenience of using their credit card rather than carrying cash.

And we all know that fewer and fewer of us are carrying cash these days…and everyone loves the rewards associated with their credit cards. Additionally, we’ve all become accustomed to paying $2-4 when we use an ATM and this cash discount fee is actually cheaper than the ATM fee for most transactions. If you explain that the Cash Discount program is a way for you to keep providing quality goods and services without increasing your overall prices, most consumers have indicated they understand and are fine with it. And again, a 4% fee on an individual transaction generally has a very small impact to the consumer, but for you, the merchant, your savings are significant.

Q: What if I don’t like the Cash Discount Program after a few days, weeks, or months?

A: If for any reason you wish to discontinue the Cash Discount Program, we will immediately change you back to traditional Interchange Pricing. You will still save a lot of money on your credit card fees by a utilizing cost plus program, which saves business owners on average 72% over the fees your previous processor was charging.