There has been a lot of talk on whether offering Cash Discounting or having a Surcharge for credit card sales is the right thing for a business to do to save on the costs of accepting credit cards. This article will provide a brief overview of each.

First here is what the Durbin Act says about Cash Discounting:

As of January 27, 2013 several Card industry changes went into effect with regards to the credit card company’s federal class action litigation settlement. The settlement requires Visa and MasterCard to change some rules for merchants who accept their cards, including allowing merchants to “offer discounts to customers who pay with payment forms less expensive than Bank Debit cards”.

1. Clear and conspicuous signage is required by law to be displayed at the business entry point and at the point-of-sale to easily and accurately explain the discount program payment options – if a customer “chooses to pay with cash or check the service charge is discounted”.

2. The customer service fee or discounted amount must be present on any generated receipts from the transaction.

  • Base cost
  • Cash discount
  • Total Sale

 How Cash Discount Pricing works

A “cash discount” occurs when a merchant decreases the price posted for their goods and services for alternative payment / purchases. No surcharges or fees are allowed on debit card transactions, specifically PIN based debit.

What this means is that a merchant may offer a “Cash Discount” for paying by a particular means and/or for not using a credit card for payment. A merchant simply adjusts all of their prices by the set amount of the percentage rate we charge for processing credit cards. By adapting this rate program all of the merchant costs for processing credit cards are passed through to the customer.

A merchant must display a sign at the checkout area stating that Cash Discounts are available, along with the discount rate.

 How Surcharging Works

Offset the cost of credit card processing fees by offering customers an incentive to pay by cash. Lower the cost of doing business. A merchant can add a surcharge fee to the total cost of the transaction for customers paying with a credit card. This surcharge can be no more that 3.99% of the sale. Basically, a merchant can call this surcharge a “Convenience Fee” for paying with a credit card. Again, debit cards cannot be charged a Surcharge when presented.

Eleven states—California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas do not allow Surcharging!!

If a merchant decides to offer this type of charge, signs must be placed at the door and at the checkout area. These signs must clearly state that there will be a Convenience/Surcharge fee for all credit card charges. The sign must also state what that percentage will be (again, no more than 3.99%)

If a customer decides to pay with cash, then the Convenience/Surcharge will not be applicable.

If you have more questions on Cash Discounting or Surcharging and how it can help your business, call:  800-476-5020 opt. 1 (sales)!