As stated in the Durbin Amendment (part of the 2010 Dodd-Frank law) businesses are permitted to offer a discount to customers as an incentive and to encourage customers to pay by alternative methods other than a credit/debit cards including either checks or cash in order to automatically receive a discount which is applied at the time of sale.
The Dodd-Frank law prohibits a payment card network such as Visa “from inhibiting the ability of anyone to provide a discount for payment by cash, checks, debit cards, or credit cards,”. “Neither surcharging, nor a cash discount is illegal.”
1. Clear and conspicuous signage is required by law to be displayed at the business entry point and at the point-of-sale to easily and accurately explain the discount program payment options – if a customer “chooses to pay with cash or check the service charge is discounted”.
2. The customer service fee or discounted amount must be present on any generated receipts from the transaction.
The Cash Discount Program is most ideal for businesses with low ticket sales, since you are passing your merchant processing fees to your customer. If your business doesn’t fall into this category, we recommend going with a lower discount rate or using our low cost conventional processing.
Until recently, Visa and MasterCard regulations made it clear merchants could not charge more to a consumer who used a credit card over other methods of payment. As a result of a 2013 lawsuit against the card networks, merchants are now allowed to impose a surcharge in all but 10 states and Puerto Rico. We’ll address the surcharge in the next question below.
However, there has always been a stipulation in the Visa and Mastercard regs that allow for a discount when paying with cash.
While this may seem like an issue of semantics, It’s simply adhering to the wording of the Visa and Mastercard regulations that allow the cash discount program to be implemented.
Here’s the verbiage specific to both Visa and Mastercard Rules and Regulations:
5.11.2 Charges to Cardholders
A Merchant must not directly or indirectly require any Cardholder to pay a surcharge or any part of any Merchant discount or any contemporaneous finance charge in connection with a Transaction.
A Merchant may provide a discount to its customers for cash payments.
A Merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used, or as the Corporation has expressly permitted in writing.
220.127.116.11 Discount Offer – US Region and US Territories In the US Region and a US Territory, a Merchant may request or encourage a Cardholder to use a means of payment other than a Visa
Card or a Visa Card of a different product type (e.g., Visa Classic Card, Visa Traditional Rewards Card, Visa Signature Card) than the Visa Card the consumer initially presents. Except where prohibited by applicable laws or regulations, the Merchant may do so by methods that include, but are not limited to:
- Offering the consumer an immediate discount from the Merchant’s list, stated, or standard price, a rebate, a free or discounted product or service, or any other incentive or benefit if the consumer, who initially presents a Visa Card, uses instead another general purpose payment card or another means of payment
- Communicating to consumers the reasonably estimated or actual costs incurred by the Merchant when a consumer uses a particular general purpose payment card or means of payment or the relative costs of using different general purpose payment cards or means of payment
Remember, your stated price now carries a 4% Service Fee, so when you someone pays with cash, they are receiving a discount off of your stated price, not an increase when they pay with credit or other means of payment.
While nobody wants to pay additional fees, more and more consumers are starting to realize just how expensive it’s been for merchants to accept credit cards. By charging a 4% fee on a sales transaction, that’s a small price for customers to pay for the goods and services you provide. And (if paying that fee or Implementing the Cash Discount Program) allows you to stay in business and keep your overall costs lower, it’s a small price to pay.
In fact, surveys have shown that over 80% of respondents stated they wouldn’t think twice about paying that amount (only $1.00 on a $25.00 transaction) for the convenience of using their credit card rather than carrying cash. We are all accustomed to paying $2-4 when we using an ATM machine. A cash discount fee would actually be a better deal. And we all know that fewer and fewer of us are carrying cash these days…and everyone loves the rewards associated with their credit cards. Ever wonder who pays for those “Signature” rewards cards and cash back bonus card programs? Yep, you do. The merchant pays for it. It actually costs the merchant more fees when a customer uses a rewards card.
If you explain that the Cash Discount program is a way for you to keep providing quality goods and services without increasing your overall prices, most consumers have indicated they understand and are fine with it. And again, a 4% fee on an individual transaction generally has a very small impact to the consumer, but for you, the merchant, your savings are significant.
Sure they can. Our cash discount program is currently operating under Visa and Mastercard guidelines, but there is nothing preventing them from making changes to their own regulations at some point in the future. Cash Discount programs have been in use in the US since 2011 with no indications that either Visa or Mastercard will make changes to prevent it, but it is always a possibility. It doesn’t hurt to save money while you can.
No, in fact it’s been around for decades in Europe and is used across the US in gas stations where a cash discount is offered at the pump. Gas stations have been using this program in the US for over 15 years. Many national, state and local governments including the DMV, Secretary of State, Post Offices, Schools, Courts, and the IRS implement a Service Fee. Many merchant processing companies also offer this kind of program.
As far as we know we are the only point of sale software company offering a cash discount program.
No problem. Our solution allows you to apply a separate discount specifically for situations like this. It can be used just like any other discount you would give like a military or local discount.
Well put this way. A small merchant with a merchant account rate of 2.7%, that averages $10,000 a month in credit card volume would save $270 every month. Subtract our cash discount fee and your still saving $175 a month. The amount of savings goes up significantly with merchants that do higher volume. For the same merchant doing $50,000 a month in volume the savings would be $1350 – $95 = $1255 per MONTH!! That’s $15,060 a year!!!
Yes! That’s one of the best parts about the Blackfish Cash Discount Program. Included in the monthly program fee is a monthly credit card module fee. This allows merchants to choose from many compatible credit card processors.