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Education

Surcharge versus cash Connecticut, Florida, Kansas, Maine, Massachusetts, New
York, Oklahoma and Texas. Surcharges, however, cannot
discount – what's the be assessed on debit cards.
Surcharges are added simply for the privilege of using a
difference? credit card. Typically, surcharges are based on a specific
percentage of the total price of goods or services before
taxes are assessed.
What is a cash discount program?

There has been much confusion around cash discount
programs because people erroneously tend to associate
them with surcharge programs. A cash discount program
enables a merchant to decrease the price for cash
purchases and offers merchants an alternative to credit
card processing. Cash discount programs are not credit
card surcharges because they do not levy a fee that is
added to a credit card transaction.
Cash discount programs are set forth in the Durbin
Amendment to the 2010 Dodd-Frank Act, which states that
businesses are permitted to offer a discount to customers
as an incentive to encourage them to pay with alternative
methods to credit and debit cards. The discount for
alternatives, such as checks or cash, is applied at the time
By Matt Nern of sale.
SignaPay Ltd.
A cash discount works by applying a small customer service
redit card processing has become increasingly fee to all customer transactions. This fee is removed if the
expensive for merchants, especially for small customer pays with cash or in-store gift card. True cash
businesses that have tighter budgets and may discount technology automatically determines the service
C not bring in as much revenue as their larger fee or discount amounts, depending on the payment type.
competitors. By accepting credit cards, businesses face Legal cash discount programs must present a clear receipt
the financial burden of interchange fees, sometimes called detailing the service fee or cash discount amount.
swipe fees. On average, interchange ranges from 1 to 4
percent and, over time, can turn profits into a loss for Service fees are collected by the technology provider,
smaller businesses. who then pays off the credit card charges on behalf of the
merchant, essentially removing the need for any back-
As a result, many small businesses are seeking solutions end accounting or complex statements. The merchant will
that will enable them to keep accepting cards but avoid usually see credit card fees dramatically reduced, with
monthly interchange fees. An answer to this dilemma was only a small technology fee to pay at the end of the month.
delivered in recently formulated cash discount programs,
which were federally authorized in all 50 states in 2011. While state laws may vary for surcharge programs,
However, there has been confusion as to what a cash there has yet to be seen any direct language prohibiting
discount program is and how it differs from a surcharge. a merchant implementing a cash discount program – as
long as consumers are notified prior to purchase.
Let's discuss the main differences between surcharge and
cash discount programs, how to implement a legal and How do you implement a sound
successful cash discount program, and what merchants cash discount program?
should consider when evaluating cash discount providers.
To implement a truly successful cash discount program,
What is a surcharge? a merchant must overcome the confusion and questions
consumers and employees have about cash discount
According to the National Federation of Independent programs. At minimum, a merchant is required to provide
Business, a surcharge is a charge or fee added toward at least one point of notification prior to sale alerting
the price of a good or service and is usually added to customers that a service fee is applied to all sales and a
an existing tax. Forty states in the United States allow discount given if a cash payment is made. Multiple points
surcharge fees to customers who pay with credit cards. The of notification are recommended, for example, the door,
states that prohibit surcharges are California, Colorado, POS station and throughout the establishment if needed.

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