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Cash Discount Legal
The short answer: yes, when done correctly.
The longer answer is that there’s a lot of confusion about the difference between “cash discounts” and “surcharges,” and that confusion has led to labeling surcharge programs as cash discount programs. Let’s look at the differences between the two and how you can stay on the right side of laws and card brand regulations.
Cash Discount vs. Surcharge
A cash discount is when you post credit card prices and offer a discount on that price for customers who pay with cash.
A surcharge is when you post cash prices and charge an additional fee on top of that price for customers who pay with a card.
In the first situation, a customer pays less than the listed price. In the second case, they pay more than the listed price.
If you charge more at the register than the listed price, it is a surcharge, regardless of what processors call it. Even if a processor tells you that you’re simply adding a “service fee” or a “non-cash adjustment” it is still a surcharge.
While it may sound like a minor difference, it’s actually very important in terms of legality and compliance with card brand rules. Getting it wrong means risking fines or having your merchant account shut down.
Sources – Visa, the Durbin Amendment, CardX
CardFellow reached out to Visa and Mastercard to confirm the distinction between cash discounting and surcharging. At the time of publication, Mastercard has not replied to CardFellow’s request for clarification on cash discounts. However, Visa provided a clear statement.
