Definitely Not Surcharging: How to Properly Offer a Cash Discount
We've written in the past about Surcharging credit card and how it is a gray area in terms of legality and whether or not it is a good idea. You may have decided that while it's tempting to pass your credit card processing fees along to your customers, you will play it safe and avoid potential legal problems or reactions. What if we told you that there are options that are very similar but different available that do not have a legal problem? It's called a cash discount - let's see.
What Discounted Cash?
Cash discounting means exactly what it sounds like - you offer your customers who choose to pay with a cast, check, or debit card a discount on their purchases. Prices displayed in your store is the cash price, and customers will see a service charge added to their acceptance as a separate line item. To have a service charge discount or canceled, all they have to do is pay by cash, check, or debit card.
OK, not Discounts Cash Only Surcharging by another name?
We recognize that at first glance looks very similar to the two programs. After all, Surcharging only raise product prices for customers who pay by credit card. They key here is the concept of service charges. Under the cash discount program, you technically do not raise the price on your product, but charging for teller services you provide to all customers. reasoning goes that the merchant can offer a discount (or waive fees for) the customer that the transaction does not require the cashier and businesses to make as big of a "service." service charges should apply throughout the method of payment, but the discount can be offered to customers paying with certain methods of payment - such as cash, debit cards, and checks.
Seriously? It's Still Sounds Exactly Like Surcharging
You probably just a semantic difference, but in the eyes of the credit card company and the court case that is completely separate. Visa and Mastercard will not allow you to charge extra for credit card purchases, but they do not have such qualms about cash discounts. Again, the reason they involve the idea of service charge - it was not a rise in product prices but the additional services that the business provides. Even in countries where Surcharging is illegal or gray area, discounting cash in the clear. Just make sure you are very, very clear that you offer a discount for multiple payment methods than the extra cost for others.
Is this a Good Idea?
The jury is out on this question. Some businesses that implement programs such as cash discount their experience reactions ranging Surcharging. After all, for consumers overall effect is the same - customers who pay by credit card has a grand total higher on their reception than the customers who buy the exact same thing but paying with cash. We are in the process of conducting a survey on the attitudes of Surcharging now - stay tuned for our results in the next few months. At the end of the day it's up to you to weigh the costs and benefits of the cash discount program. We recommend informal polling your customers if you are worried about their reaction.