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What is CASH DISCOUNT or Free Credit Card Processing?

February 07, 20243 min read

The bottom line is that customers who pay with cash get a discount, customers who pay with a card still get their rewards, and business owners don't have to worry about how much they have to budget for credit card processing fees every month. IT'S A WIN, WIN, WIN!

Perhaps you have received marketing material that describes the perfect world of free credit card processing. If a business sets up an account with no processing fees, those fees are being assessed to someone else, not the business. This is the new era of merchant services, which is called Cash Discount. 

Here's an example. You've just begun a new year, and you want to maximize your profits while reducing your costs. Reduce your processing fees is an obvious way to reduce your costs. Upon reviewing your processing statements, you determine your effective rate to be 4%. Hence, for every $100 dollars you receive, you effectively pay $4. Your processor offers you Cash Discount, a service that essentially eliminates your processing fees.

When you enroll in the Cash Discount program, your processing fees are passed along to your customers. Processing fees vary by processor, but the average is around 4%. By increasing retail prices by 4% and offering a discount by the same percentage for certain types of payment, you can achieve this. Cash is usually the discounted form of payment, but you can also give discounts to other forms of payment like checks or in-house gift cards. 

A consideration for customer satisfaction should always be taken into account, which is why this model may not work for everyone. Business owners need to determine if and how this model will work for their company. Some consumers may not notice a 4% hike in retail costs, whereas others might be more price sensitive. There is a need for businesses to know how to best communicate their discount programs to their customers.

Cash Discounting has been around for 30+ years, but now it seems to be gaining momentum. People who use credit cards and debit cards regularly might be surprised not to receive a cash discount or a reversal percentage of the discount on their credit card receipts. Companies are rushing to implement these methods to reduce their processing fees. In the past few years, business owners have seen a vast array of cash discount applications, processor programs, and sales agents asking them to investigate the programs to see if it fits their business needs. Even though the program seems straightforward, there is a significant difference between surcharging customers and providing a cash discount. 

The Cash Discount program must comply with certain regulations mandated by Visa. When done correctly, the practice is perfectly legal, but the area of grey lies in determining the difference between a cash discount and a surcharge. When a business offers a Cash Discount program, it lists the prices of the goods on credit cards and discounts the charge for the processing fees when cash is paid. Surcharges (one of the most common practices and considered by some to be mislabeling of cash discount), entail that the prices listed are the already discounted cash prices, while the processing fees are added to the price. Regardless of what type of program a merchant enrolls in, they ought to do their research to determine whether it complies with the standards and practices set by card associations. 

In conclusion, merchants should investigate whether this practice is appropriate to their business before implementing it. Ultimately, this practice can help businesses save hundreds or even thousands of dollars each month. As a company implements a cash discounting method, it is important that they remain abreast of changes in laws and regulations, and make sure everything is above board. 

We are happy to share any knowledge we may have with you. So, if you have any questions, you can contact us at 209-6467253 or

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