Discounting and Surcharging - Key Characteristics
Cash Discounting
- Merchant reduces the posted / list price for customers who pay with check, ACH or cash, providing a discount to those customers.
- Cash price must be a true reduction from list price to be compliant.
- May not present actual savings if reduction in revenue is equal to card acceptance costs.
- Discount can end up costing more than acceptance costs depending on discount offered, application of bank fees to cash deposits and other cash associated costs.
- Permitted in all states.
- Good for B2B & multichannel businesses, professional services, automotive, small retailers and casual dining restaurants where customers have time to weigh options.
- Not good for quick serve food and beverage businesses, convenience stores or other businesses with fast paced queues where decision making can cause customer discomfort and increase time in line. Also not good for merchants whose banks charge fees for cash deposits.
Dual Pricing / Dual Display
- Merchant presents customers with two prices, one for cash and one for card.
- Cleanest way to display price differences.
- Permitted in all states.
- Price comparisons must be side-by-side, displayed equally to customers and shown clearly before payment to be compliant.
- Posted prices on menus, price tags, e-commerce product pages, invoices, and receipts must show the card price. Also, clear signage must be visible at entrance and point of sale stating all posted prices reflect card prices.
- May not present actual savings if reduction in revenue is equal to card acceptance costs.
- Merchant could end up paying more for PIN debit and signature debit transactions depending on what bank charges for cash deposits and/or processing.
- Good for B2B & multichannel, professional services, automotive, small retailers and casual dining restaurants where customer has time to weigh options.
- Not good for quick serve food and beverage businesses, convenience stores or other businesses with fast paced queues where decision making can cause customer discomfort and increase time in line. Also not good for merchants whose banks charge fees for cash deposits or merchants with large SKU counts.
Surcharging / Zero Cost Processing
- Places an explicit upcharge for goods or services purchased by customers with credit card. (Surcharging is not applicable to pre-paid or debit cards.)
- Passes full cost of acceptance, up to 3.00%, to credit card holder.
- Not permitted in all states. (Is permitted in New Mexico.)
- Merchants must register with Visa, Mastercard and their acquirer at least 30 days before implementation.
- Clear signing must be displayed at entry and point of sale stating percentage of surcharge.
- Receipts must show surcharge as a separate line item.
- Can't be combined with discounting or dual pricing.
- Good for thin margin B2B & multichannel merchants where discounting would materially impact margins, larger ticket professional services firms, medical providers, legal professionals, and contractors & trades where lower cost ACH and invoicing options are available.
- Not good for salons, spas, tattoo shops, barbers, casual or fine dining restaurants or other businesses where a significant part of employee compensation is tip dependent. Also may not be a good approach for QSR food and beverage businesses where customers are more elastic and merchants can enroll in Visa and Mastercard low ticket programs.