Cash Discount

The Skinny on Cash Discount Programs

Business owners all over the world are checking out the cash discount program.
It is not hard to understand why since most business owners are losing anywhere between 2-4% in credit card processing fees with every transaction.

In a day and age where everyone wants things quickly and for the least amount, like same-day funding, it is no surprise that cash discount credit card processing is on the rise.

Cash discount processing is gaining in popularity in steam in California and the United States, but if you think about it, you have seen them around for decades.

Gas stations have used cash discounts on the price of gas for many years. If you pay with cash, it costs a little less per gallon. If you pay with a credit card or gift card, the cost is as listed on the sign and on the pump.

What is a Cash Discount Program?

A cash discount program is a type of credit card processing that passes the cost of acceptance back to customers who choose to pay with a credit card or debit card. Cash discount merchant services allow business owners to continue to accept all major credit cards, but without the loss of 3-4% in charges or as a fee.

Cash discounting works by giving a discount to all customers who choose to pay with cash instead of a credit card or debit card. Customers who choose to pay with a credit card will pay the marked amount because the processing cost is built into the cost of the product. This allows the business owner to get the full payment from the customer and not incur any credit card processing fees. READ BELOW to see an example of how a merchant cash discounting program works.

Cash Payment Example

A customer in a convenience store walks up to the register with $20 worth of goods. She notices a sign next to the register explaining that a 4% service charge is added to all store sales. By paying with cash, she gets an instant cash discount of 4%.

The attendant scans her products which come to a total of exactly $20.00. The customer informs the clerk that she is going to be paying by cash, which makes her total $20.00. Most banks also allow their customers to withdraw cash through a cash advance to make the money more accessible to the customer. Real-time payments made in the form of cash will end up saving the customer some money. Using a credit card may result in simpler and faster payments, but they would be charged a small fee or surcharge for doing so. A discount to customers paying with cash is given to the customer. It rewards them for paying with cash. So, while credit card companies may prefer your customers to pay with cards, they will be rewarded for using cash.


A customer in a convenience store walks up to the register with $20 worth of goods. She notices a sign next to the register explaining that a 4% service charge is added to all store sales. By paying with cash, she gets an instant cash discount of 4%. The attendant scans all her products which come to a total of exactly $20.00. The customer informs the clerk that she is going to pay with a credit card, and the total price of the goods changes, so she will be paying a total of $20.80.

The customer inserts their card into the terminal to pay for their goods and is charged a total of $20.80 to cover the cost to accept credit.
The customer completes the transaction and leaves having paid $20.80 for $20 worth of goods, knowing that she could have saved 80 cents had she paid with cash.

The cash discount program allows the customer to pay with a credit card, just like normal. The difference is that they get the choice whether to incur the fee that would normally go to you, the business owner, or use cash for a discount. In both above cases, the cost of the goods being brought to the register was exactly $20.00. This is what the business has set as the credit card price of the goods. 

The customer paying by cash has $.80 deducted from the transaction as a cash discount, rather than paying the extra 80 cents to cover the processing fee. By paying with cash, the first customer saved 4% on their goods by purchasing them at the cash price. Paying with a credit card may make for faster payments, but the second customer incurred the credit card processing fee and paid for the cost of processing a credit card payment, so the business did not have to cover that cost. By utilizing cash discount merchant processing, the business receives the full payment amount of each transaction without paying a with credit card processing cost or fee. As payments innovation continues to evolve, you will find your customers using credit cards as real time payments more and more. This is because the payments innovation makes paying with a card convenient for the buyer.

What is a surcharge program?

A surcharge program is a type of credit card processing where you charge the consumer an additional fee or surcharge on top of the cost of goods to cover the merchant processing cost.

What is the difference between a cash discount and surcharge program?

A cash discount program and a surcharge program are both payment systems that businesses use to recoup the merchant services fees that are charged each time a customer presents a credit card as a form of payment. A surcharge program adds on an additional fee at checkout to cover the merchant services fees. A true cash discount program gives the customer a discount for cash payment by avoiding any additional costs. In many establishments that offer a cash discount program, the regular price or posted prices on each item are prices for credit card payment. Any payment card method other than cash keeps the price of goods the same to cover credit card processing costs but using cash will reduce the cost by up to 4%. With our cash discount credit card processing, your customers will love you. When it comes to offering a credit card surcharge vs cash discount, which will your customer appreciate more? No one likes to feel nickeled and dimed with added fees (isn’t that why you are here?), but everyone loves a discount.

Are debit cards subject to surcharge fees?

No, surcharge fees are not able to be applied to debit cards or other forms of prepaid cards, like gift cards. Surcharge fees are directed towards credit card purchases, not cash purchases, as a merchant savings from credit card fees. Debit card transactions are not charged the same fees and have a different fee structure from credit cards or gift cards. Debit cards are charged a flat fee when presented as a means of payment. The prohibition on debit cards is nationwide while customers who pay using American Express, Discover, Visa and Mastercard can be subject to additional fees in certain states. Visa Mastercard and others within the payment card networks can have a surcharge added to their final total, but not debit cards. Surcharge program fees are often referred to as customer service fees as they are associated with fixed costs.

What are the average fees for credit card processing?

The average fees for credit card processing fall in the 2-4% range for most businesses. Each merchant account has a set credit card transaction rate it charges qualified cards, mid-qualified cards, and non-qualified cards. The rate differs in most cases on each credit card transaction. Actual payment processing fees and monthly fees are determined by the card types, and any merchant fees are added on top of the actual cost to process a credit payment.

A merchant’s card volume and average ticket are taken into consideration by the merchant services provider to determine the fees that will be assessed to accept credit cards. Higher card volume and a low average ticket would be given a different rate percentage and swipe fee than those with low card volume and a higher average ticket.

Mobile payments and online payments through a virtual terminal also have a different fee structure depending on whether the card is present or absent during the transaction. The rate a business is charged is based on risk, but usually averages out to be between 2-4% of the transaction value.