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Cash Discount vs Surcharge Program: What You Need to Know

These days, more and more business owners find cash discounts and surcharge programs appealing. As you may know, credit card processors charge fees for every transaction you initiate. Basically, card associations take additional money from your pocket.

Studies have shown that people are willing to spend more when they use a credit card rather than cash, as much as 83% in some cases. If you are running a business, then you have to offer digital payment methods to your customers. But if you want to avoid credit card fees, you can do so in two ways:

  1. Cash discount programs
  2. Surcharge programs

Cash Discount Programs

A cash discount occurs when an enterprise offers markdowns for customers who pay with paper money instead of a credit card. There are many advantages for business owners to use discount programs, but the most important one is that cash is much easier to process than credit cards.

A cash discount program will help your business and your customers.

You can offer cash discounts in two ways:

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Cash Discount

This is when you need to raise all your prices to handle increasing business expenses but offer a discount for customers who pay with paper money.

Reverse Cash Discount

This is when you apply a policy of adding a checkout fee on all purchases at your location but offer a discount to buyers who pay with cash.

The Benefits of Offering a Cash Discount

There are a few things to consider when offering cash discounts. The main advantages are:

Eliminate the Possibility of Fraud

A business that accepts credit card payments understands the risk of ‘friendly fraud’ or chargebacks. Not only are they costly, but they can seriously harm your business in the long run. If a merchant ever initiates a chargeback, it will reflect negatively on your business.

The great news is that when opting for a cash discount, you will completely eliminate the worries of any chargebacks. When working solely with paper money, you will cut out any bank’s influence.

Thereby, you will ensure a smooth transaction and still offer your customers a great price for your products.

Eliminate Credit Card Processing Fees

When running a small business, it’s great not having to deal with account fees. Any payment you receive in cash will go directly into your cash register, without other added fees. There are no percentages or rates. Credit processing fees can range between 1.5 percent to 3.5 percent. So by offering a cash discount program, it will save you a lot of money.

Can Discounts Are Great Marketing Tools

Cash discounts can create growth. The buyers who walk into your business for a cash discount will most likely come back because people love cash discounts. After all, you will be offering them a small discount on some items they might have bought at full price.

Surcharge Programs

A surcharge program means charging a fee to buyers who use credit cards. By charging your customers extra money, you will be able to recover the processing fees from sales to them.

However, the surcharge cannot exceed four percent or the amount the merchant pays in swipe rates. They can’t be levied on debit cards or prepaid credit cards.

Basically, a surcharge program won’t affect any debit cards, cash payments, or digital payments. Such a program can only be applied to credit card payments, where the credit card processing fees are typically added.

If your business is operating in more than one state, you can use a surcharge program only in the states where it is legal to do so. Currently, five states don’t allow surcharges.

They are Colorado, Kansas, Maine, Connecticut, and Massachusetts.  Moreover, card associations have strict guidelines regarding surcharging. Probably the most well-known rule is that you can’t charge certain cards more than others.

When it comes to benefits, you will escape the burden of credit card processing fees, as they will no longer fall on you but on your customers. You will allow your customers to choose their payment method but still reduce your expenses.

Cash Discount Programs vs. Surcharge Programs

If you use a surcharge program, you will increase the cost for credit card users, but if you use a cash discount program, you will decrease the cost for cash users.

The main differences between a cash discount program and a surcharge program are:

  • Cash discounts can be applied on credit, debit, or swiped transactions while surcharging is only available on credit card payments.
  • Surcharging is prohibited in five states plus Puerto Rico, while cash discounting is legal in all 50 states.
  • If you choose to enact a policy for a surcharge program, you need to register in advance. Compared to surcharging, a cash discount program does not require registration in advance with the major card brands.

You may not be surprised to find out that some customers might be offended by the additional costs added to a surcharge program. It would often be better for enterprises to offer a cash discount program for customers instead of a surcharging option.

You will reduce prices rather than add on additional fees, and customers will more likely become regulars.

Final Words

Both cash discounting and surcharging can be effective enough for your business to reduce expenses and payment processing fees. It is essential to find a solution to be more competitive in today’s market.

Your customers will always seek value in their purchases, so a cash discount program may just be the perfect way to provide discounts to your customers while saving a lot of money yourself.

Websites such as  can offer more information you may need to help your business be profitable.


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