How is the Public Receiving Cash Discounting?

Cash Discounting Cash discounting has been around for several years now, and its 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. And a cash discount program can be implemented legally and in compliance with Visa/MC regulations by using a preprogrammed terminal that properly calculates credit card transactions, and by posting conspicuous signage that clearly explains this to customers.

Merchants all over the country are now saving significant amounts of money on credit card processing fees by using cash discounting. The way it works is that a service fee (usually 4%) is added to credit card transactions to cover the interchange fees, and the signage makes clear that this fee is being added and that all prices posted are for purchases made in cash. It is easy to see the benefits of the cash discount program, but what about the risks?

Merchant services companies have been skeptical of cash discount programs, and many of them have not marketed it to their clients. Many businesses have been skeptical as well, believing that cash discounting will cost them customers. This, of course is a very valid concern as you would never want to do anything that would cause you to lose business.

Reactions to Cash Discounting

Reaction to the cash discount program has surprised many in the industry, and it turns out that this program is running into far less resistance than most people ever believed it would. When cash discounting was new, there were three primary concerns:

Lost Business: As we just covered, the main 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 big concern about how Visa, MasterCard, and the other card brands would accept this program. It would seem that offering a cash discount would hurt the card brands’ business as well, and that they would not take it lying down.

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

Here is what we have seen so far in these three 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 get complaints, it is usually only a couple people, and it normally only happens within the first week or two after implementing the program. But this type of reaction is really no different than what happens when a business implements a price increase, which of course is necessary from time to time.

Recently, I saw someone post a complaint in a neighborhood Facebook group about a restaurant that had a cash discount. The person was complaining about an $0.80 fee on a $20 ticket, and she was lambasted by others in the group. Most of the public understands that businesses have to pay credit card processing fees, and the general sentiment was that it is a lot more fair to pass these fees along to card paying customers rather than making everyone pay for them with an overall price increase. Some also criticized her for complaining about an $0.80 fee, saying that if that was such a big concern for her, she shouldn’t be eating out in the first place 🙂

I was a bit surprised by the overwhelming reaction against the person who posted about the cash discount program – I don’t think anyone came to her defense. But this reaction is definitely in line with what we have seen with businesses who have implemented the program. At the end of the day, it is really not a big deal for most customers. And for the handful who are concerned about the fee, they simply bring cash the next time they come into that business.

Card Brand Crackdowns

Visa, MasterCard and the others are certainly not crazy about cash discounting. They were fighting it for a while, but now they have largely dropped their opposition. At first, they were worried that a cash discount would cause more customers to pay in cash, which would mean they would lose money on bank card fees. What we have all found out is that cash discount programs have very little impact on consumer behavior at all.

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

Consumer Advocacy Group Reactions

The major long-term concern about cash discounting is how consumer advocacy groups would react to it once the practice was more widespread and a larger percentage of merchants adopted the program. Would they complain that cash discounting is unfair to consumers? Would they lobby lawmakers to change the rules?

So far, we have seen the exact opposite reaction.

Consumer groups are not complaining about the cash discount program, and the media and politicians have not complained about it either. 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, and 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 standing with merchants who implement it. They are asking 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 strongly endorsing cash discounting, the long-term outlook for this type of program is very positive.

Use Your Cash Discount Program to Help the Community

Changing to cash discounting can certainly save your business a lot of money, and as we are seeing, you will very likely not lose customers, and in fact, you may actually gain customers. There are also ways of building even more support from your customer base for a cash discount program, which may include loyalty programs and partnerships with local charities.

At National Franchise Business Solutions, we work with a preferred processing partner who donates a portion of the proceeds from each bank card transaction to a charity whose mission is to provide nutritional meals and education to poor and disadvantaged children within the local community. Along with the signage for the cash discount program, we also provide signage that highlights this partnership and gives your customers even more reasons to enthusiastically support your business.

If you are interested in learning more about the cash discount program and how it can help your business, give us a call at 651-202-8636 or email us at franchisecity1(at) We look forward to serving you!

Is the Cash Discount Program Right for My Business?

Cash Discount ProgramCash discounting is becoming increasingly popular among merchants throughout the United States. In fact, the number of businesses who are using a cash discount program has doubled over this past year alone. Cash discounting became legal in 2010 through the passage of the Dodd-Frank Wall Street Reform Act, and subsequent court rulings have affirmed the right of businesses to offer a discount to customers who pay with cash.

How Does Cash Discounting Work?

A cash discount program is similar to a surcharge program in that businesses charge an additional fee to customers who pay by card. A typical service fee for paying by card would be 4%. This means that, on a $10.00 purchase for example, the customer would pay $10.40.

There are two main things that a merchant who wants to implement a cash discount program must do to stay compliant with Visa and MasterCard regulations:

– Post visible signage that clearly explains the program; and

– Use a preprogrammed terminal that processes credit card transactions properly.

This signage needs to be present in a place where customers can easily see it. And the terminal must process the transactions correctly, because merchants are not allowed to make an additional profit on a credit card transaction, which might accidentally happen if they tried to implement a cash discount program on their own.

What are the Advantages of a Cash Discounting?

Of course, the number one advantage for merchants who implement a cash discount program is the ability to keep 100% of all transactions, whether they be in cash or credit card. This could mean a very significant savings, depending on your monthly processing volume. And the more you process each month, the better off you will be under the program.

Here is an example of how much you can save through cash discounting. Let’s say you have a restaurant that processes $100,000 in credit card transactions each month. On traditional interchange pricing, you are probably paying an average of 2% to 3% in overall processing fees. It could be higher if you have a clientele that likes to use high mileage rewards cards to pay for their meals, or it could be lower if most of your card paying customers use debit cards.

Conservatively, let’s say you pay 2% overall on the $100,000 in monthly processing volume. This would still mean $2,000 coming out of your profits each month just to cover the cost of your card transactions. With a cash discount program, you would keep all of that money and pay a fixed monthly fee, usually somewhere between $50 and $100 per month for your processing company to run the program and provide support. So, in this example, cash discounting would save you at least $1900 per month.

What would you do with an extra $1900 per month in profit? Use it to expand your business?  Maybe expand your restaurant? Open a new location? Or maybe spend it on some targeted marketing to help grow your customer base.

There are much better ways that you, as a business owner, can spend this money. And this is why merchants (and their interest groups) fought so hard for so many years to obtain the legal right to implement a cash discount program.

In addition to the cost savings, another major advantage of cash discounting is that it is much easier to implement than a similar program such as surcharging. In the states where surcharging is legal (which now include 45 states along with the District of Columbia), there are still many compliance hoops that you must jump through to properly implement the program.

With cash discounting, all you need is the signage and a properly programmed terminal.  There is no need to change any of your prices, because the signage will state that all prices displayed are for cash payments, and a service fee is added for debit and credit card transactions.

On a related note, psychologically, customers are much more likely to accept a cash discount program than a surcharge program. Consumers never like to pay more for the same product or service, but everyone loves to get a discount. Most consumers also know that businesses have to pay an extra fee to process credit card transactions, and when they see that the merchant is only passing along those fees to those who use cards rather than raising prices on everyone, they tend to see that as a fairer pricing structure.

What are the Drawbacks of a Cash Discount Program?

The number one potential drawback of cash discounting is of course the fear that merchants who implement the program will lose customers. This is a very valid concern, and it is really the only reason every business in America who has heard of the cash discount program has not already implemented it. In an increasingly competitive marketplace, no business wants to do anything that might cost them customers, and that is understandable.

The question is, does a cash discount program really scare away customers? The answer to that question is different for every business. The good news is, cash discounting has been around for several year now, and so far, nearly all of the merchants who have implemented this program have not seen a decline in business.

By and large, customer reactions to cash discount programs have been similar to how they would normally react when a business implements a small price increase. During the first couple weeks, one or two customers might complain. But after a month or so, everyone adjusts, and those who are concerned about the nominal service fee simply start paying in cash.

One thing you would want to look at when considering whether or not the cash discount program is right for your business is your average ticket cost. Going back to the restaurant example, customers are not likely to complain too much if they have to pay an extra $.80 on a $20 meal, or even an extra $4.00 on a $100 meal. This is about the same as an ATM fee, and consumers have grown accustomed to convenience fees like these in our increasingly digital age.

On the other end of the spectrum, let’s say you are a building contractor and your customers pay you $10,000 or more for a typical job. In this scenario, they might be a little more anxious about paying a service fee when it adds up to an extra $400. It might still make sense to do a cash discount, but the higher ticket price is something you will definitely need to think about.

Cash Discounting as a Marketing Tool

As mentioned previously, offering a discount rather than implementing a surcharge can turn your cash discount program into a positive for customers. You can even use the fact that you are offering a discount for paying in cash in your marketing to help bring in new customers.

The cash discount can also be combined with other positive elements, such as loyalty programs and partnerships with local charities, to help market your brand and foster goodwill within your community.

For example, at National Franchise Business Solutions, we work with a preferred processor that donates a portion of the proceeds from each credit card transaction to a charity that is dedicated to providing nutritional meals for poor and disadvantage kids in the local community. Merchants who process through us are able to highlight this fact, giving customers another good reason to support their business.

Is the Cash Discount Program Right for my Business?

Each business owner will have to weigh the advantages and disadvantages of cash discounting for themselves and decide if this program is right for their business. We make things easier for merchants by allowing them to try out the program without any risk. With us, there are never any contracts to sign or long-term commitments to make. Just give the program a try and see if what we are saying it isn’t true.

We believe that, once you realize the amount of money you can save on the cash discount program, and once you see that the program does not scare away your customers (and can actually help you gain more customers), you will never want to go back to traditional pricing again. But if, for any reason, to the program is not working out for you, we will happily switch you back to traditional processing and still guarantee that we will save you money over what you are paying now.

If you want to find out more about cash discounting and whether or not it might be a good fit for your business, give us a call at 651-202-8636 or email us at franchisecity1(at)

Can Businesses Charge a Fee for Paying by Credit Card?

Credit Card TerminalMerchants are growing increasingly weary of the credit card processing fees being charged by the likes of Visa and MasterCard. These companies have been steadily raising interchange fees for several years to help cover the cost of their mileage and rewards programs, and it is starting to seriously cut into merchants’ bottom lines. Things have gotten so bad, in fact, that even large chains like Krogers are taking a stand against high credit card processing fees.

So, what can a small business owner do to fight back? Can a business charge a fee to customers who pay by credit card? The short answer is “yes”.

There are actually a few different ways a merchant can pass along the cost of credit card processing fees to their customers; surcharging, convenience fees, and cash discounting.

Here is a quick overview of these three options:


Credit card surcharging is currently legal in 45 out of the 50 states as well as the District of Columbia (DC). As of this writing, the practice is still not legal in Colorado, Connecticut, Massachusetts, Oklahoma, and Kansas. There are also some additional restrictions that apply if you want to implement a surcharge program in New York or Maine.

With surcharging, the merchant adds a fee for all credit card transactions. The fee is typically around 3.5%, but it can be as high as 4%. This fee covers the credit card processing costs, allowing the merchant to keep 100% of the funds received from the transaction.

Visa, MasterCard, American Express, and Discover have strict compliance requirements to implement a surcharge program, among them being that clear signage must be displayed at the point of sale thirty days prior to implementing the program. Another restriction is that surcharges cannot be imposed on debit and prepaid debit card transactions.

This means that merchants still have to cover the cost of debit card transactions. But the good news is that, with most of these types of transactions, the fees are only around 1%, as opposed to the 3% to 4% it can cost a merchant when a customer pays by credit card.

Convenience Fees

Convenience fees are similar to surcharges, and they are legal in every state. However, they can only be used in very limited circumstances. A convenience fee can be imposed only when the merchant is providing an alternative method of payment from the way most customers purchase their product. The most common example is in the ticket industry.

You may find that, when you try to buy a ticket for an event, there is an extra convenience fee for purchasing the ticket online rather than in person. The fee is there not because the customer is using a credit card, but because they are paying online. If the customer were to buy the tickets at the gate, they would pay the same price, regardless of whether they paid with cash or by credit card.

Cash Discounting

Like convenience fees, cash discounting is also legal in all 50 states. This has been the case since the passage of the Dodd-Frank Wall Street Reform Act in 2010. The Durbin Amendment within Dodd-Frank permitted businesses to offer a discount to customers who pay with cash.

Since the passage of this law, the rights of businesses to implement a cash discount program have been affirmed by court rulings. And in 2011, Federal Trade Commission spokesman Mitchell Katz said that Dodd-Frank prohibits payment card networks from “inhibiting the ability of anyone to provide a discount for payment by cash, checks, debit cards, or credit cards.”

Cash discounting works similarly to a surcharge program, but there are some key differences.  With a cash discount program, the merchant technically offers a discount to customers who pay in cash, rather than charging them extra to pay with another method. Like surcharge programs, clear signage is required at the point of sale.

The merchant does not have to change all of their pricing to implement a cash discount program – the signage just has to inform customers that the prices displayed are for cash purchases, and an additional fee is added when paying by credit card.

Aside from the fact that cash discount programs are legal in all 50 states, the main difference between this type of program and surcharging is that, with cash discounting, there is no distinction made between credit and debit cards. The discount is given only to cash paying customers, and the end result is that an additional fee is charged to all customers who pay by card.

Another important difference is that surcharging can be done in person or online, as long as customers are properly notified. Cash discounting, on the other hand, can only be offered when the customer has the opportunity to pay cash and receive a discount, which can only happen with face-to-face sales.

Finally, the two programs are presented to the customer differently. With surcharging, you are telling the customer that there is an added fee to pay by credit card. With cash discounting, you are telling the customer that they can save money by paying in cash.

This may not seem like a big difference, but psychologically, it can be. Customers don’t like to be charged extra. On the other hand, customers love to save money. By presenting the program as a cash discount, customers might tend to see it more positively.

Is it Right to Charge Customers a Fee to Pay by Card?

This is a question that a lot of merchants wrestle with. Just because you can charge customers extra to pay by credit card, should you? Ultimately, this is for each individual merchant to decide. But in considering this issue, there are a few things you should keep in mind:

It costs you extra to take credit card payments. When the price of goods and services go up, businesses usually pass the cost on to the customer in the form of a price increase. Is it fair to do the same thing with credit card processing fees?

Many customers who pay by card are receiving generous rewards for doing so. And this has been driving the cost of credit card processing higher in recent years. Do you believe it is fair for customers to help cover the cost of their own rewards programs?

With interchange fees continually going up, your business may eventually have to raise prices to cover these fees. Which would be more fair – making all your customers pay for this, or charging only those customers who pay by credit card?

How Will my Customers React to a Surcharge or Cash Discount Program?

This is perhaps the most important question merchants want answered when deciding whether or not to pass the cost of credit card processing fees onto their customers. Understandably, merchants have an inherent fear that if they implement a program like this, customers may get mad and leave them.

Fortunately, cash discounting and surcharging have both been around for several years now, and those who have implemented these programs have found two things to be generally true:

Cash Discounting and Surcharging do not Seem to affect Consumer Behavior: Studies conducted with merchants who implemented either cash discount or surcharge programs found that credit card processing volume did not change significantly after they were implemented.

By and Large, Customers have No issue with these Programs: Studies also found that 99.2% of customers did not bring up the program at the point of sale. In other words, in the vast majority of cases, customers do not have a problem with paying a little extra to use a card.

Of course, this will play out differently for each individual merchant. What usually happens is that a customer or two might mention the extra fee during the first couple weeks after the program is implemented, similarly to when a business implements a price increase. But after another week or two, customers adjust, and those who have an issue with the extra fee just start paying by cash.

There are also ways for merchants to turn the cash discount into a marketing tool. As mentioned earlier, the psychology of saving money by paying in cash can actually bring in new customers. And if you combine this with other positive elements, you can build greater customer loyalty.

For example, at National Franchise Business Solutions, one of our preferred processors gives a portion of the proceeds from the cash discount program to a local charity that is dedicated to feeding poor children in the community. This partnership not only goes a long way toward providing nutritional meals to disadvantaged kids, it is also something our merchants can highlight to their customers with signage at the point of sale. And when customers find out that proceeds from their credit card transactions go to such a great cause, they are motivated to continue doing business with these merchants.

Is Cash Discounting Right for You?

At the end of the day, only you can decide whether or not it is a good idea to pass your credit card processing fees along to your customers. If this is something you think might be right for your business, we are happy to help.

You can try it out with us risk free to see how it goes. Experience has shown us that, once you get past 30 days, you will realize that customers are just fine with the program, and you will never go back to traditional processing again. But in case we’re wrong, there are no contracts or commitments, and you are free to switch back to your old processor at any time.

To learn more about cash discounting or surcharging or to get started with the program, give us a call at 651-202-8636 or email us at franchisecity1(at) We look forward to serving you!