By now, you?ve probably notice the rising popularity of Cash Discount programs in an effort to offset your merchant service fees. A Cash Discount program is a method of implementing something fee to all customers who pay with a card, while providing a discount to those who pay with cash. Cash Discount programs are legal in all 50 states per the Durbin Amendment (portion of the 2010 Dodd-Frank Law), which states that companies are permitted to offer a discount to customers as an incentive for paying with cash. While this sort of program has been used by gas stations for years now (displaying cash prices), there’s still confusion on how to implement a Cash Discount program the proper way.

Guidelines and Requirements
The card associations have strict guidelines on what a Cash Discount program must be implemented. The fundamental steps being 1) Correct signage should be posted at the entranceway and check out 2) The quantity of the added service fee must be clearly displayed on the receipt and 3) Offering your customers a cash discount verbally. Even though cash discounting program post different prices, as a retailer it is not necessary to do so. The posted prices are believed cash prices and the signage allows for a fee if the payment isn’t made with cash. To become compliant, merchants with a Cash Discount Program need to display the Base Quantity of the transaction, the Cash Discount, and the Total Cost of the transaction on the customers? receipt (see below).

Applying the Service Fee
Minus the proprietary technology programmed into your terminals, you would have to manually apply the service fee. But if a fee is incorrectly applied to a transaction, the excess fee charged to customers would be labeled as a Surcharge which is prohibited in 10 states (California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, NY, Oklahoma, and Texas). If the fee isn’t a Cash Discount and is deemed as a Surcharge, even though allowed in a state, has strict requirements on the amount of the Surcharge. As a merchant, you need to register with Visa/MasterCard to be able to legally apply the surcharge. A Cash Discount Program has no necessary registration.

It is also vital that you note that you’re forbidden by Visa, Mastercard, as well as your processor?s rules to profit on credit cards transaction, which could happen if you accidentally charged a lot more than you were charged by your processor. Even though many processors may provide a Cash Discount program, not all of them offer and utilize the compliant technology that’s compatible with your terminals. A significant difference we’ve seen while looking at the providers over the industry may be the Cash Discount line item. Many providers offer a program without the Cash Discount line item showing on the receipt. It is important that when considering processors, they are offering you a compliant program with capable technology to show the required line items on the receipt.

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