How Cash Discounting & Surcharging Can Save You Money on Credit Card Processing

Are you looking for ways to save money on card processing fees? Cash discounting and credit surcharging are two ways you can offset the costs. Both options have their own advantages and disadvantages, however, so knowing the difference is important to finding which one is right for your business.

How Much Can Cash Discounting Save?

What is Cash Discounting?

Cash discounting involves setting a product or service price slightly higher to account for credit card processing expenses. Customers paying with cash or debit cards then receive a discount off this price. For example, if a product costs $100, you could list it at $102 and provide a $2 discount for cash or debit card payments. Some merchants use a dual pricing model with cash prices and credit/debit prices. You most commonly seen this at gas stations. This is best achieved with a point of sale system that can automatically keep track of both options.

One of the main benefits of a cash discount program is that it allows businesses to offset the cost of processing credit card payments without charging customers an additional fee. By offering a discount for cash payments, businesses can encourage customers to pay with cash or debit, which can save money on processing fees.


  • Offsets processing costs without imposing extra fees on customers.
  • Encourages cash or debit card usage, reducing processing expenses.
  • Legal in all 50 states, eliminating regulatory concerns.
  • Easy implementation - no regulatory rules to follow.


  • Involves handling physical cash, which can be inconvenient.
  • May require additional expenses for cash processing equipment.

What is Credit Surcharging?

Surcharging entails adding a fee to credit card transactions to cover processing costs. Customers pay more than the advertised price when using a credit card.


  • Simplifies accounting since payments are electronic.


  • Some states restrict or prohibit surcharging (Illegal in Connecticut, Maine, Massachusetts, and Oklahoma.)
  • Point of Sale software must support functionality.
  • Possible customer resistance to paying extra fees.
  • Requires proper signage and adherence to card brand rules.
  • As of 2023, Visa capped surcharges at 3% with othe brands likely to follow.

Rules to Follow When Implementing A Surcharging System

To implement surcharging correctly, several steps must be taken. First, you need to complete surcharge addendum paperwork with your payment processor to declare your intent to surcharge. Additionally, both you and your processor must register with Mastercard at least 30 days before initiating surcharging.

Proper signage is essential when surcharging. Inform customers of the percentage they will pay if they use a credit card, and make it clear that debit cards will not incur surcharges. This signage should be prominently displayed at the entrance of your business and near the point of sale or register. Furthermore, ensure that the surcharge amount is clearly indicated on the customer's receipt. In the case of card-not-present transactions, it's crucial to inform your customer of the surcharge amount before processing the transaction.

After completing a sale, you are obligated to report the surcharge amount collected to all relevant card brands. If you have payment integration enabled in your credit card merchant account, these credit card transactions can be seamlessly integrated into your accounting and tax software, eliminating the need for manual data entry.

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