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Payments

How a Cash Discount Program Saves You Money

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Topics: Payments, Product Updates

February 11, 2021

Minimizing business expenditures is always important, but now more than ever, many business owners are exploring cash discount and surcharge programs as a way to offset credit card processing costs. However, there’s a fine line between compliance and a non-compliance. It’s easy to find yourself on the wrong side of the credit card brands or even state and local regulations, as more companies jump on the cash discount bandwagon and offer confusing or misleading programs. To help you make the right decision for your business, here’s why SpotOn typically recommends SpotOn Assist, our cash discount program, rather than a surcharge program.

"Save $9,500  annually and increase sales by 15%, on average, with SpotOn Assist, our simple, compliant cash discount program."

What is Cash Discount? 

Cash discount is a program that allows you to provide a discount to customers who purchase a product or service with cash. Customers who purchase a product or service with a credit card will not receive the discount.

How Does Cash Discount Benefit My Business? 

By offering a cash discount for non-credit card transactions and a full price when customers pay with a card, you will cover some of the credit card processing fees for card transactions. How? When you charge a customer paying with a credit card full price, that means the 4% discount you would have applied if they were paying with cash will instead go towards your credit card processing fees.

How Does it Work?

You will need to set a price at an item or service level—one price for cash and one price for card. The credit card price, or the "full price" is what must be advertised to your customers.

Let's look at an example scenario: 

If you have a $10 item, this would be the "full price," or the "card price" of the item. Customers using a credit card will pay the full price for the item. If a customer pays with cash, then they will receive a discount of 4%. 

Customer Paying with Card: $10.00 (Full/ Card Price)

Customer Paying with Cash: $10.00 (Full Price) x -0.04% (Cash Discount) = $9.60 (Discounted/Cash Price)

Three Methods to Offer a True Cash Discount Program

There are three different ways you can set up a compliant cash discount program. Depending on the nature of your business, one or more of them will typically work better.

  1. Display full price/credit card pricing for all goods and services (i.e. on price tags, menu, etc.), but offer a discount to cash paying consumers by displaying a sign at the cash register.
  2. Display both cash and credit card prices prominently at your business. A good example of this method can be seen at gas stations, which display their prices for both cash and credit cards. 
  3. Utilize a point-of-sale system that allows you to display cash vs. credit at the checkout and on the receipt. With this method, the point-of-sale system automatically adjusts the amount and displays appropriate amounts for cash vs. credit. 

What About a Surcharge? 

A surcharge is a small fee added to your customer’s purchase cost for the “privilege” of using a credit card. The surcharge fee is a small percentage added to the full sale amount. You can then use the fee to cover the cost of credit card processing, essentially reducing your own costs to almost nothing. Keep in mind, however,  surcharging is prohibited in 6 states, while cash discount is allowed in all 50 states. 

In addition, there’s the issue of perception to consider. First, your customers might not like the idea of paying additional fees above the transaction amount. Then, there are the credit card brands (Visa, Mastercard, Discover, American Express, etc.). Like all other companies, the card brands want to maintain a positive public image. That means making sure consumers can use their cards without feeling like they’re getting penalized. To protect their reputation, card brands require merchants to formally notify them if they add a surcharge to credit card purchases. 

A  true cash discount program resolves these issues. Your customers aren't paying any additional fee. Instead, they are paying full price, with the incentive to receive a discount if they pay with cash. They’re happy, and the card brands are happy because they’re not being portrayed in a negative way.


Is a cash discount program right for your business? Get your free demo today to see how SpotOn Assist works and learn how much money it can save you. Our program is a true cash discount that’s compliant in all 50 states, with no games or hidden fees, so your customers will stay happy and keep coming back to your business! 

 Get Your SpotOn Assist Demo

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