Card fees come out of your margin on almost every sale. That's why more owners are asking about two programs that move that cost to checkout: cash discount and credit surcharge. They sound similar, but they work differently, they follow different rules, and they fit different businesses.
Here's a plain-English breakdown.
What is a cash discount program?
With a cash discount program, you post two prices: a card price and a slightly lower cash price. Customers who pay by card pay the card price, and customers who pay cash pay less. The difference between the two covers the per-transaction processing cost, so it stops coming out of your margin.
It's the same idea as the two prices you've probably seen at a gas pump.
A few things to know:
- It applies to all card types, credit and debit alike, because the card price is simply your posted price.
- Signage and receipts matter. Customers need to see both prices clearly before they pay, and receipts need to show the transaction correctly.
- It isn't "zero cost." Card customers pay the card price, and some plans include a flat monthly software or equipment fee. You should see every fee in writing before you sign.
What is a credit surcharge?
A credit surcharge is a fee added only to credit card transactions. Your posted prices stay the same, and a surcharge line shows up when a customer pays with a credit card.
The rules are stricter:
- Credit only. A surcharge can never be applied to debit or prepaid cards, even when they're run as credit.
- It's capped. The surcharge can't be more than the lower of your actual cost of acceptance or the card network's limit.
- Notice is required. You generally must notify the card networks and your processor before you start.
- Disclosure is required. Customers need to be told at the entrance and at the point of sale, and the surcharge must be shown on the receipt.
- State law varies. Some states restrict or prohibit surcharging, and rules can change. Check the current rules for every state you operate in.
How the two compare
| Cash discount | Credit surcharge | |
|---|---|---|
| Applies to | All card payments | Credit cards only |
| Debit cards | Card price applies | Never surcharged |
| Pricing display | Card price and cash price | One price plus a credit surcharge |
| Main rules | Clear signage and receipts, card network rules, state law | Network cap, advance notice, disclosure, state law |
| Customer experience | Familiar "two prices" model | Extra line at checkout for credit only |
Which may fit your business?
Restaurants. Many restaurants consider cash discount programs because they cover all card types, and lots of diners pay with debit. Think about how tips will work with card and cash pricing, how your menu and online ordering display prices, and how servers explain it if a guest asks. Clear signage keeps surprises to a minimum.
Auto body shops. Repair tickets are often large, and large tickets mean large card fees. Either program may fit. Surcharging can make sense where many customers pay by credit and state law allows it. A cash discount can cover debit as well. If insurance companies or fleet accounts pay you, ask how those payments would be handled under each program.
Retail. Retail moves fast, so simplicity matters. A cash discount program works automatically at the register once it's set up, and staff don't need to do anything different. Make sure shelf tags, signage and your POS all show pricing consistently.
Is there a third option?
Yes. Some businesses prefer interchange-plus pricing: you pay the card network's cost plus one disclosed markup, and your posted prices stay exactly the same. It's often a good fit for businesses that don't want to change pricing at all. The trade-off is that card fees still come out of your margin, just more transparently.
Questions to ask before you switch
- Which programs are allowed in my state right now?
- Will you help me set up signage, receipts and POS settings correctly?
- What monthly or equipment fees apply?
- How will tips, refunds and online orders be handled?
- What happens if I want to change programs later?
Curious what you pay now? Our savings calculator shows what card fees may be costing you, based on numbers you enter. It's free and takes a few minutes.
Open the savings calculator →Get a straight answer
The right fit depends on your business, your customers and your state. A free, no-obligation statement review from Keepwell can show which option, if any, may cost you less. Sometimes the answer is to stay where you are, and we'll tell you that too.
Want us to look at your statement? Upload it at keepwellpayments.com/upload for a free, no-obligation review.
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Keepwell Payments, LLC is an independent payments agency, not a bank or payment processor. Each merchant account is set up with a payment processor we partner with and its sponsor bank, named in writing before you sign. Merchant accounts are subject to approval. Results vary by business. Programs must follow card network rules and applicable state law, and your pricing and every fee are confirmed in writing before you sign. This article is general information, not financial or legal advice.
Your business is responsible for running its program correctly, and rules vary by state and can change.