Is Dual Pricing (AKA Cash Discounting) Right for Your Business?

Dual pricing is a technique some businesses use to help offset card processing fees, but you'll want to carefully consider if it's right for you.

2 months ago   •   6 min read

By Garrett Calcaterra

If you’ve ever seen a gas station sign with two sets of prices on it—one for cash and another for credit cards—then you’re already familiar with dual pricing. Also known as cash discounting, dual pricing is a common pricing strategy to give customers the choice to pay with cash instead of a credit card, thereby avoiding credit card processing fees. It’s legal in all 50 states and it’s not just for gas stations. With the right restaurant POS or retail POS system, any type of business can run a dual pricing program. But is it right for your business?

Most local businesses find that it makes more sense to charge customers the same price for both cash and credit purchases, but there are scenarios where dual pricing could benefit your business. Let’s take a quick look at how exactly dual pricing works, how it’s different from a surcharge, and the questions you’ll want to ask yourself before deciding which pricing model you should use.

What is dual pricing?

An example of dual pricing / cash discounting: a gas station sign with both credit prices and cash prices
Gas stations frequently use dual pricing with different credit and cash prices.

Dual pricing is a pricing model where you offer a discount to customers who pay with cash. Typically, this pricing model is implemented with a payment terminal or POS device that is configured to offer both cash and credit prices.

For your dual pricing model to be compliant, you must advertise the credit card price to your customers. You can do this by either displaying the credit card price as your full price or by displaying both cash and credit prices, just like gas stations do.

Most businesses that utilize dual pricing do so as a strategy to minimize or offset credit card processing fees. But to truly offset credit card fees with dual pricing, you first need to raise the full price on all your items. For retailers, this means updating price tags and your point-of-sale catalog. Likewise, for restaurants, this means updating menus for both your printed menu and your point-of-sale.

What is a surcharge, and how is dual pricing different?

A surcharge is a line-item fee that is added on top of the normal purchase price when paying with a credit card. In essence, it allows you to offset some or all of your credit card processing fees by passing those charges on to your customer.

Unlike dual pricing, surcharging is not legal in all 50 states. As of May 2023, surcharging is prohibited in Connecticut and Massachusetts, while Oklahoma and Colorado limit their maximum surcharge rate to 2%. The credit card brands also have their own rules around surcharging. Visa, for example, is lowering their maximum surcharge amount from 4% to 3% on April 15, 2023, and requires that you register your surcharge program through your payment processor or acquiring bank.

Surcharging also differs from dual pricing in two other important ways. First, dual pricing is communicated to customers as a discount from the regular price, whereas a surcharge is an added fee. While both pricing plans can rankle customers, surcharging, in particular, can come across as an unfair fee that might deter customers from doing business with you.

A dual pricing receipt shows a lower cash price while a surcharge receipt shows an added line item charge
Dual pricing and surchaging are presented differently on your receipt.

Second, dual pricing requires a more sophisticated configuration on your payment terminal or point-of-sale system. Rather than simply adding an extra fee, your payment device needs to be programmed to charge the full price by default and show the discounted price for cash-paying customers.

4 questions to ask yourself before choosing dual pricing

While dual pricing may sound alluring, especially if you're currently paying high credit card processing rates, there are several factors to consider when deciding whether dual pricing will help or hinder your bottom line.

1. How do your customers prefer to pay?

This is the most important factor when considering dual pricing. If most of your customers already pay with cash, then offering a cash discount makes a lot of sense. You can raise your full prices—which only customers paying with cards will have to pay—and your regular cash-paying customers get to pay the same cash price they expect. You make the extra revenue you need to pay for credit card fees and your core customers stay happy. Win, win.

On the other hand, if a good number of your customers are paying with a credit card, dual pricing can come across as an unfair punishment targeted at them. Particularly if you run an upscale business or are located in a metropolitan area, running a dual pricing system can be a huge deterrent to customers.

Fair or not, the customer perception is often that you're being cheap or that your business is unsophisticated. After all, your pricing already takes into account your other business expenses such as rent, wages, and supplies. Why wouldn’t your pricing account for credit card prices, too?

2. Will you miss out on increased sales?

Study after study has shown that consumers spend more on average when using a card rather than cash. According to Fundera, 80% of consumers prefer using a card over cash, and the average non-cash transaction is $112 compared to the average cash transaction of $22. Add in the growing popularity of mobile pay methods like Apple Pay and Google Pay (which are charged as credit card transactions), and you may not be serving your card-paying customers well with a dual pricing plan.

A customer taps their card to a mobile POS device to pay for goods
Tap to pay and mobile pay methods are growing in popularity.

3. How much will you end up really paying to your payment processor?

Be sure to look at the fine print from your payment processor when considering a dual pricing plan. Typically, your credit card rates are much higher with dual pricing. Yes, this is accounted for by raising the full price on all your items, but at the end of the day, if you’re going to raise your prices anyway, why not do it yourself and negotiate the best credit card processing rate you can get?

4. Is it worth paying extra to have a payment professional set it up for you?

Perhaps the biggest benefit to dual pricing is having a payment partner who you trust that can do all the heavy lifting for you. Raising prices on your own and making sure you have the correct signage for customers can be a hassle. A qualified expert can be a huge help.

At SpotOn, for example, our account executives will help you assess your current credit card rates and work with you to determine the pricing model that makes the most sense for your business. If dual pricing is right, they’ll help you choose the dual pricing rate, get the signage you need, and ensure your payment terminal or POS is set up correctly—so that it’s easy for you, clear for your customers, and compliant.

It’s also important to remember that keeping credit card processing fees in check is only one piece of the puzzle. When you partner with SpotOn, you also get a suite of built-in tools that not only help you cut cost, but also increase revenue. With email marketing, promotions, loyalty rewards, sales insights, and review management all in one place, you’re able to boost efficiency and increase sales, leading to healthier and more profitable business for you.


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