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What is a cash discount program? Is it legal? How can I do it?

No more paying a credit card processing bill every month?! This would be a dream come true for the average business owner. The rise of cash discount has been meteoric over the past five years.


However, there seems to be some ambiguity about the legality. Can a business owner get into trouble by implementing a cash discount program? This blog is meant to be a brief discussion touching on the major points of consideration for any business owner before implementing a cash discount solution.



Are cash discount programs legal in all fifty states? The simple answer is yes, but that comes with a caveat as it’s important to note that many cash discount solutions are improperly executed and this can leave the merchant at risk. In order to properly answer this question, a very bright line of distinction needs be made between a cash discount and a surcharge. Cash Discount is allowed in all fifty states. Surcharges are allowed in 43 states, but legally banned in Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, and Oklahoma. This is important because many “cash discount” solutions offered today are actually surcharge programs. This blog is particularly relevant if you live in one of the above mentioned states. Less so, if you don’t.




cash discount is when you post credit card prices and offer a discount on that price for customers who pay with cash.


For example, a customer walks through a hardware store and sees prices listed on the various items. The customer selects a number of products and goes to check out. The cashier then informs her that the items she selected add up to $100 BUT she only need pay $96 if she pays cash. This is a true cash discount


surcharge is when you post cash prices and charge an additional fee on top of that price for customers who pay with a card.


Using the example above, if the same customer walks through the store, sees the prices, goes to check out and only then does the cashier inform her that while the items she selected total $100, an ADDITIONAL CHARGE will now be added if she pays with a card; bringing the new total to $103. This is a surcharge and, again, that is prohibited in Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts and Oklahoma.


Anywhere outside of these seven states, it really doesn’t matter if it’s a compliant cash discount program or a surcharge program. But within those states, it matters a great deal.


Another very important note, a debit card can never have a surcharge or any additional charge under any name put on it – not in any of the fifty states. This is true even if it’s “run as credit” in a state where surcharges are legal. For more on this, go to Visa’s FAQ on surcharging. Clearly spells out that surcharges cannot be applied to debit.



The discussion thus far has been somewhat negative. It’s given definitions and do’s and dont’s but the good news for business owners is that most times in most places you are perfectly fine in charging a little extra when a customer uses a credit card. Why should a business owner pay 2, 3 or even 4% on every credit card transaction? Many people use expensive, high rate cards to collect air miles and cash back etc. and its the business owner who pays for that.


There are thousands of business owners across the country who have successfully implemented a cash discount and/or a surcharge program.



For more information about how to implement a compliant cash discount/surcharge program, click here to book a free consultation today.