What is a cash discount program?
Short answer: A cash discount program shows two prices on every tag: a cash price and a card price about 3.75% higher. Cash customers pay less, and the higher card price pays your card processing fees, so a card sale leaves you the same as a cash sale.
How it works, on one tag.
Take a bottle that sells for $24.99. Its tag shows cash $24.99 and card $25.93, both in the same size. The customer sees both before they pay.
- Pay cash: $24.99 goes in your drawer, same as today.
- Pay by card: the terminal charges $25.93. The extra $0.94 pays the card processing fee, so you keep the full $24.99.
Without a cash discount, that same card sale on Square’s published 2.6% + 15¢ leaves you about $24.19. Every card sale costs you a little; across a month it adds up to hundreds or thousands of dollars.
What makes it legal.
The rule is simple: both prices are posted before the customer pays, and nothing is added at the register. Visa’s own Q&A says a cash discount is done correctly when the merchant shows “both the card and the cash price listed side-by-side per item”, and the card total isn’t reached “by applying an additional fee for a card payment”. Federal law also protects discounts for paying cash.
What gets shops in trouble is the other version: posting only the cash price and adding a “non-cash adjustment” or “service fee” at checkout. Visa treats that as a surcharge, and New York’s Department of State lists it as illegal. Some states ban surcharges outright.
Who it suits.
Shops where most customers pay by card and margins are thin: liquor stores, nail salons, pizza shops, cafés, delis and small restaurants. It works with a cash register or a point-of-sale system that lets you choose your card processor. It doesn’t work with Toast or Square, which only run their own payments.
Questions owners ask.
Is a cash discount program the same as a surcharge?
No. With a cash discount, both prices are on the tag before the customer pays. A surcharge is a fee added to card payments, usually at the register. Card networks and several states treat them differently. See cash discount vs surcharge.
Do debit cards pay the card price?
Yes. Debit pays the card price shown on the tag, the same as credit. That’s allowed because it’s a posted price, not a fee. What card networks forbid is adding a surcharge to a debit card.
How much higher is the card price?
Usually 3.75% above the cash price. Some states, like New York, cap the gap at your processing cost, so it can be lower. The exact number is shown on every tag.
Do I lose customers?
Cash customers pay what they always paid. Card customers see the card price before they pay, so nothing is a surprise at the register. Signs at the door and the counter explain it.
Sources
General information, not legal advice. Rules change and differ by state and city; check the rules where your business is. See our terms and disclaimers.