Q: What is the Cash Discount Program?

A: “Cash Discount” occurs when a merchant decreases the price of their products and services when doing a cash purchase. It is a method of implementing a service fee to all customers, while giving a discount to those who pay with cash. This offsets the transaction fees for the merchant by collecting a percentage on every credit card payment.


Q: How does it benefit me as a merchant?

A: The program eliminates fees for merchants which means that you get almost 100% of your revenue by passing thru a non-cash price (typically 3.5% 3.75% higher than cash price) to customers paying with credit or debit card. Latest report shows that by average you are wasting $10,000 annually in processing fees, think of how money you save. Take a look at this example:

Q: Is it legal to offer a Cash Discount?

A: Let me quote Mitchell Katz of Federal Trade Comission “The Dodd-Frank law prohibits a payment card network such as Visa “from inhibiting the ability of anyone to provide a discount for payment by cash, checks, debit cards, or credit cards,” said Katz. “Neither surcharging, nor a cash discount is illegal.”

It is legal as long as you offer it to all your customers and disclose the offer clearly and conspicuously. Link to the FTC Citing the Rulings https://www.ftc.gov/tips-advice/business-center/guidance/new-rules-electronic-payments-lower-costs-retailers

Q: Is this a new program?

A: No, in fact it’s been around for decades in Europe and is used across the US in gas stations where a cash discount is offered two different prices at the pump. Gas stations have been using this program in the US for over 15 years. Many national, state and local governments including the DMV, Secretary of State, Post Offices, Schools, Courts, and the IRS implement a Service Fee.

Q: What is necessary to get started?

A: The Card Association (Visa, MasterCard, etc.) requires merchants to have visible signage informing customers of The Cash Discount Program. The credit card terminal will print a line item that shows the service fee being generated as the result of using a card; this is the amount being saved by your cash customers.

Q: Why can’t I do my own Cash Discount and charge the Service Fee?

A: The Association has strict guidelines about the only ways cash discounts may be implemented by merchants: 1) with the correct signage and 2) the amount displayed on the terminal receipt. If the cash discount isn’t applied according to The Association’s guidelines, and a customer complains, The Association can then cancel merchants’ accounts, taking away their ability to accept any credit card.

When a fee is incorrectly applied to a transaction, any additional fee charged to those consumers using a credit card is labeled a Surcharge and that is expressly forbidden by Visa, Mastercard, and the processing provider without taking very specific steps. This can lead to steep fines and termination from accepting Credit Cards.

Q: Is it not illegal to charge customer with these fees?

A: Cash Discount Programs are in full compliance of the law and card networks because you are offering everything as a discounted price in the store, and charging an adjustment to that price as a service fee, therefore charging the regular price. Gas Stations and other service retailers have been doing this program for several years. There has always been a stipulation in the Visa and Mastercard regulations that allow for a discount when paying with cash.

The Specific verbiage specific to both Visa and Mastercard Rules and Regulations:

From Mastercard Rules 15 November 2016

5.11.2 Charges to Cardholders

  • A Merchant must not directly or indirectly require any Cardholder to pay a surcharge or any part of any Merchant discount or any contemporaneous finance charge in connection with a Transaction.
  •  A Merchant may provide a discount to its customers for cash payments.
  • A Merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used, or as the Corporation has expressly permitted in writing.

From Visa Core Rules and Visa Product and Service Rules – 22 April 2017 Discount Offer – US Region and US Territories In the US Region and a US Territory, a Merchant may request or encourage a Cardholder to use a means of payment other than a Visa

  • Card or a Visa Card of a different product type (e.g., Visa Classic Card, Visa Traditional Rewards Card, Visa Signature Card) than the Visa Card the consumer initially presents. Except where prohibited by applicable laws or regulations, the Merchant may do so by methods that include, but are not limited to:
  • Offering the consumer an immediate discount from the Merchant’s list, stated, or standard price, a rebate, a free or discounted product or service, or any other incentive or benefit if the consumer, who initially presents a Visa Card, uses instead another general purpose payment card or another means of payment
  • Communicating to consumers the reasonably estimated or actual costs incurred by the Merchant when a consumer uses a particular general purpose payment card or means of payment or the relative costs of using different general purpose payment cards or means of payment 

Remember, your stated price now carries a 4% Service Fee, so when you someone pays with cash, they are receiving a discount off of your stated price, not an increase when they pay with credit or other means of payment.

Q: Is this the same thing as a Surcharge? Is it allowed in all states of the US?

A: A “surcharge” occurs when a merchant increases the price for credit card purchases. 40 States in the US allow surcharge fees to customers who pay with credit card. – Surcharges can’t be assessed on debit cards. They are added simply for the privilege of using a credit card. A “cash discount” occurs when a merchant decreases the price for cash purchases. Cash discount programs do not discriminate one card over another. Cash Discounts reward customers for paying by a particular means and/or for not using a particular means of payment. In Summary: A “surcharge” occurs when a merchant increases the price for credit card purchases. A “cash discount” occurs when a merchant decreases the price posted for their goods and services for cash payment / purchases.

Cash Discount program, while seemingly similar, is actually very different, particularly in the eyes of Visa and MasterCard. As mentioned in the preceding Q&A, the 2013 ruling against the card networks resulted in merchants now being able to implement a surcharge. The surcharge is allowed in all but 10 states (California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas, plus the U.S. territory of Puerto Rico).

The Surcharge carries with it several stipulations:

  • Only credit cards may be surcharged –no debit cards (even if the receipt is signed or pin number)
  • Special Forms need to be completed and sent to Visa, MasterCard, Discover and your credit card processor for approval
  • Signage must be posted for at least 30 days prior to implementing a surcharge alerting your clientele
  • There is a 4% maximum that can be imposed
  • Surcharging is only allowed in states where the program has not been excluded

With the Cash Discount program, these limitations are not in place, as you are not implementing an additional fee for accepting a credit card, you are providing a discount for those who pay with cash. This is a clear distinction, and one that Visa, Mastercard, and the courts have agreed upon:

In a Cash Discount program, all prices in your store will carry a specific percentage, (e.g. 3.5%). The posted prices are your cash price, and cash payments are excluded on this fee. Our process automates a Cash Discount Program for you which is different than the Surcharge. With this program we can hang a signage notifying all customers to pay a certain fee, and cash transactions will have the fees be waived. Advanced Technology Solutions does the automation of your equipment so that this fee is automatically added for those customers using any method of payment other than cash (essentially credit cards). While this may sound very similar to the Surcharge Program, it is distinctly different in that everyone is paying an increased fee, but those who pay with cash receive a discount, whereas with the Surcharge program, you are specifically stating that those paying with credit cards will pay more. Most importantly it is aligned with the rules of Visa Mastercard, Discover, Amex. Think of this as an incentive for cash paying customers

Additionally, you are forbidden by Visa, Mastercard, and the Processor’s rules to profit on a credit card transaction, which could happen if you accidentally charged more than you were being charged by the processor. By utilizing the Advanced Technology Solutions. Cash Discount program, we establish proper pricing for you to ensure you stay within all stated guidelines.

Q: Will it not upset my customers?

A: Everyone really looks after their finances, a fee is something that might frown upon, but you may want to let them realize just how expensive it’s been for merchants to accept credit cards and the fees you as merchant shoulder. By charging a 4% service fee on a sales transaction, that’s a small price for customers to pay for the goods and services you provide. And (if paying that fee or Implementing the Cash Discount Program) allows you to stay in business and keep your overall costs lower, it’s a small price to pay. ATM withdrawal charges around $2-$4, and it much cheaper to pay with card than withdrawing cash, plus they earn rewards everytime they use their card for purchases.

In fact, surveys have shown that over 80% of respondents stated they wouldn’t think twice about paying that amount (only $1.00 on a $25.00 transaction) for the convenience of using their credit card rather than carrying cash. And we all know that fewer and fewer of us are carrying cash these days…and everyone loves the rewards associated with their credit cards.

Most customers would shrug off these charges as it does not impact them a lot, but think of the impact of that to your business.

Q: What if I don’t like the Cash Discount Program, can I cancel it anytime?

A: If for any reason you wish to discontinue the Cash Discount Program, we will immediately change you back to traditional pricing. You will still save a lot of money on your credit card fees by utilizing the low rate program we offer, which saves business owners on average 72% over the fees your previous processor was charging.

Q: What if I am under contract?

A: Cancellation fee is terrifying for some, but we can explore the possibility of assisting you with the cost of early termination if it makes good business sense for all parties. When can we come meet with you to review the terms of your current agreement and show you the benefits of our solutions vs. what you have currently.

Q: Will you totally eliminate my monthly card processing fees?

A: Most merchants will see some small fees on their bill as it’s hard to get every transaction to zero out completely based on all the variances in the Interchange billing structure. That said, we typically see the monthly fees drop down below $50 per month, even if previously the fees had been several hundred or even several thousand dollars!

Your statement will have the net dollar amount in fees as close to zero as possible, we set you up with a daily discount billing plan. That means on a $25 transaction, you collect 4% for a total sale amount of $26. You will receive $25 in your account the following day and the 4% fee will have been subtracted out. At the end of the month, you’ll have the net cost of your goods and services in your bank account with minimal processing fees.

Q: I have a high average sale amount and the 4% might be viewed as being too high for my customers to stomach. Couldn’t I absorb some of that fee and still save at the same time?

A: On a case by case basis, we will work with you to implement a hybrid solution where you charge a Service Fee of anywhere between 1-4% to your consumer and you.

Q: What if I have a terminal lease?

A: Terminal leases often have incredibly high rates relative to the underlying piece of equipment you are “renting.” For instance, it’s not uncommon to see a lease on a desktop terminal for $79 per month for 5 years. The retail price of the hardware is often only $300-400 and the cost of that terminal will be $4740 by the time it’s all paid off!

So when you know the truth it’s nauseating to make that $79 payment, but if we can save you $300 or maybe even $3000 per month in processing fees, it becomes much easier to stomach. Likely better to continue making the payment and set a calendar event to cancel as soon as possible

Q: Couldn’t the credit card companies not allow a program like this in the future?

A: That is a possibility, but the program has been in use in the US for the past 4 years with no indications that either Visa or Mastercard will make changes to prevent it. We are currently operating under Visa and Mastercard guidelines, there is nothing preventing them from making changes to their own regulations at some point in the future

If the program were to be disallowed, we would simply switch you to our low cost traditional program where you’d pay some of the lowest rates possible within the normal card processing framework.

Q: Where can I learn more?

A: Here are some links on the topic of the Cash Discount Program, Surcharging, and Visa/Mastercard regulations. They are the opinion of the authors and are independent of ATS.


To learn more about our Cash Discount Program, contact us below: