One of the ways some businesses deal with the costs of accepting credit cards is by implementing a surcharge or a cash discount. The goal of both surcharge and cash discount programs is to lessen payment processing costs without impacting sales or burdening staff with extra duties. Your solution should be customer focused. Businesses should understand surcharging and cash discounting and determine if its right for their customers.
 

Fraternal Twins

Surcharging and cash discounts are governed by a patchwork of Card Brand Rules and laws designed to protect consumers and dictate the context when they may be applied. 

Though the two programs are similar, there are distinctions businesses must respect.
 

Surcharging

Surcharging adds a fee on top of the amount of the transaction. If you sold an item for $100 and the surcharge was 3.95%, the fee at checkout would be $103.95. 

Surcharging is illegal in five states, but is allowed in California, eMerchant can walk you through the process to ensure you are compliant with your state’s laws. 

Surcharges must not exceed the merchant’s discount rate and in no event be more than 4%.  Surcharges may only be applied against credit transactions. 

Debit cards, regardless of whether the PIN is entered, may not be surcharged. Surcharges differ from a convenience fee which is typically applied as a flat amount and are limited by the type of merchant and/or method of acceptance (eCommerce for example).
 

Cash Discounts

Cash discount programs reduce the fee if the customer is paying with cash. 
A $100 transaction becomes $97 if the customer pays with cash. 

Cash discounting has gained traction however as merchants have employed signage to comply with the disclosure rules. 

For example, the merchant may have a sign that states there is a “Service Fee Applied to All Transactions” and “Cash Discounts are Applied to All Cash Purchases”. In this context, all card transactions, even debit transactions are charged a fee in excess of the list price of the item. 

Though eMerchant recommends surcharging over cash discounting, we do have both offers available.

Surcharges and Cash Discounts must be clearly conveyed. Cardholder receipts must break out the surcharge separate from the total and a cash discount must provide the discounted amount on the receipt. 

These solutions are gaining traction, especially for inelastic items such as auto repair and funeral services.

Businesses should think through their customer base, staffing, costs of payment acceptance and cash management when determining their optimal approach. 

If you have questions about Surcharging and Convenience Fees, get in touch with us here or give us a call at (866)979-0260 and we can answer any questions you may have.