To offset the ever-rising costs of accepting consumer electronic payments, merchants are – in record numbers – implementing a program often referred to as “cash discount”.
Cash Discount is where a merchant offers an incentive for paying in cash (and/or check) instead of any other payment type.
Historically, the only option a merchant had to offset their processing fees was a surcharge program – the customer is charged a fee for using a credit card. The fee is itemized on on the receipt, and the transaction flows in two pieces – one on the base amount and the other on the “surcharge rails”.
Why Not Just Surcharge?
Surcharging is clean and thanks to companies like CardX, it is becoming more and more accepted across the country. As of this writing, there are still a few states that outlaw surcharging – Massachusetts and Connecticut are the last two states specifically banning surcharging. If you’re not in one of these states, you may be thinking “So why not?”
Surcharging – a Basic Primer
Ignoring state-level restrictions, surcharging cannot be done on debit cards and American Express cards. Compliant equipment will actually read the card being used, determine what type of card it is, and then apply the surcharge only if it is not a debit card or American Express card. When the surcharge happens, the customer pays a fee to use that card – called a surcharge fee.
Cash Discount – Your Program is Probably Non-Compliant
Here’s how you can tell if you are surcharging or if you’re offering a discount (or like-kind incentive) for cash.
Look at your customer receipt.
Is there an itemized amount on there? It could have many names:
- NCA
- Non-Cash Adjustment
- Non-Cash Fee
- Service Fee
- Product and Service Charge (PSC)
- COVID Fee (yes people are doing this)
- Surcharge
If your receipt shows the customer they had a line-item addition for the use of a credit card, guess what? It’s a surcharge.
Sorry, it’s the truth.
The Receipt Tells a Story – a story of compliance
First, your receipt should show the total the customer paid.
Second, your receipt should NOT show an increase to the price for using a credit card.
Third, your receipt should show something notifying the customer that they did not receive a cash discount.
For example:
- My cash discount customers have a receipt that shows the total amount paid (no itemization of the non-cash adjustment).
- Also, every single credit card receipt either shows A) that the cash discount was $0 or B) the specific dollar amount of cash discount they would have gotten had they paid with cash.
