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How are Consumers Reacting to Cash Discount?

Cash discounting has been here for a few years creating a track record with proven results. It's legality has been repeatedly affirmed by Congress and the courts. Businesses clearly have the right to offer a discount to customers who choose to pay in cash rather than by credit card. A cash discount program can be implemented legally and in compliance with Visa/MC regulations with the use of a programmed terminal that properly calculates credit card transactions and by posting signage that clearly explains this to customers.

Merchants countrywide are saving significant amounts of money on credit card processing fees with the use of cash discount which adds a service fee to credit card transactions covering the cost of interchange fees. Signage makes clear that this fee is being added and that all prices posted are for cash purchases. The benefits of the cash discount program is obvious, but what about the risks?

Merchant services companies have been skeptical of cash discount so many have not marketed the program to their clients. Many businesses have been skeptical as well, believing that cash discounting will result in loss of customers. This is a valid concern, obviously no program should cause a loss of business.

Reactions to Cash Discounting

Reactions to the cash discount program has been a surprise to many in the industry. Results have shown that the program has run into far less resistance than most believed it would. When cash discounting was new, there were three primary concerns:

Lost Business: As just touched on, the primary concern among merchants, and really the only reason every merchant in America does not do cash discounting, is the fear of losing customers.

Card Brand Crackdowns: Merchant services companies also had a concern on how Visa, MasterCard and the other card brands would accept this program. It was assumed that offering a cash discount would negatively affect the card brands’ bottom line as well, and like all businesses, they are not in the business of losing money.

Consumer Advocacy Group Reactions: Finally, how would consumer advocates react to card paying consumers required to pay a service fee for goods and services?

Here is what we have seen so far in these areas:

Lost Business

Merchants who have implemented the cash discount program have seen virtually no impact on their business. Surveys have shown that overall, roughly 99% of customers never even bring up the cash discount, let alone complain about it. If a merchant does have complaints, it is usually only a few and occur within the first week or two after implementing the program. This type of reaction is really no different than when a business implements a price increase, which of course, is necessary from time to time.

Recently, a complaint was posted in a neighborhood Facebook group about cash discount at a local restaurant. The complaint was over an $0.80 fee on a $20 ticket. The poster was lambasted by others in the group. Most of the public understands that businesses pay credit card processing fees and the general sentiment is it is fair to pass these fees along to card paying customers rather than making everyone pay for them with an overall price increase.

The overwhelming reaction against the person posting about the cash discount program was a surprise – without much defense to her reaction. But this reaction is in line with what is seen with businesses who have implemented the program. At the end of the day, it is not an issue for most customers. The few concerned about the fee simply pay cash the next visit but then usually accept the practice and go back to paying by card.

Card Brand Crackdowns

Visa, MasterCard and the other card brands are certainly not an advocate for cash discounting. For a time, they fought it but now they have mostly dropped their opposition. The initial concern was that cash discount would cause more customers to pay in cash resulting in losses on bank card fees. Since implementation, the cash discount programs have shown little impact on consumer behavior.

In general, those who pay by card will not stop paying by card because of a nominal service fee, just as ATM fees have not stopped consumers from using the machines. A few might switch to paying in cash because of a cash discount program, but that kind of change is barely measurable on a macro level. For this reason, credit card brands are not overly concerned about cash discounting anymore.

Consumer Advocacy Group Reactions

The major long-term concern about cash discounting is the reaction by consumer advocacy groups once the practice was more widely implemented. Would they say that cash discounting is unfair to consumers? Would they lobby lawmakers to change the rules? So far, the opposite reaction has occurred.

Consumer groups have not made cash discount program complaints just as the media and politicians have not. On the other hand, the American Civil Liberties Union (ACLU) published an article earlier this year that praises the program.

The ACLU article laments the rise of cashless stores and the push by credit card brands to persuade businesses to stop accepting cash. This is obviously a major concern, particularly for those with low incomes who do not have access to bank cards. Many who live in minority communities as well as those who are undocumented are in this situation. Any business that refuses to accept cash is clearly disenfranchising these groups.

In the article, the ACLU encourages consumers to support businesses that charge a fee for credit card use:

If you visit a store or restaurant that charges a higher price for credit card purchases, understand that this is a socially beneficial policy and be supportive. Merchants are explicitly permitted to pass swipe fees (also known as “interchange fees”) along to customers, which among other things is fairer to low-income customers who don’t have credit cards and shouldn’t have to absorb the costs of those cards.

The ACLU also encourages businesses to adopt this type of program:

If you are a business, consider passing along those fees to increase fairness as well as customer awareness of how the current system works.

So rather than fighting the cash discount program, the ACLU stands with merchants who implement it. They ask consumers to understand why passing along credit card fees to customers is a good thing, and to support merchants who have implemented this practice. With consumer groups like the ACLU endorsing cash discounting, the long-term outlook for this type of program is positive.

Learn more about the cash discount program and how it can help your business. Give us a call at 877.392.2737 or email us at We look forward to serving you!

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