Cash Discount Program Guide: 6 Best Options & How To Get Started
Do you want to use a cash discount program and are looking for the best credit card processors? Find out about cash discount programs in this guide.
Frank has been writing about payment processing and business services since 2015. He is a retired Air Force officer and a former practicing attorney. He has a Bachelor of Science degree in Psychology from The Pennsylvania State University and a Juris Doctorate degree from the Ventura College of Law, and currently resides in Paso Robles, California.
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Frank KehlFrank has been writing about payment processing and business services since 2015. He is a retired Air Force officer and a former practicing attorney. He has a Bachelor of Science degree in Psychology from The Pennsylvania State University and a Juris Doctorate degree from the Ventura College of Law, and currently resides in Paso Robles, California.
Senior Staff Writer
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Advertiser Disclosure: Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity.
Every small business owner has to struggle to balance the high cost of accepting credit cards. The interchange fees charged by the major credit card brands and issuing banks have steadily risen over the years, making it more expensive than ever to allow your customers to pay for their purchases with credit cards.
To lower the cost of accepting credit cards, many small business owners have sought ways to pass some (or all) of these costs back to consumers who choose to use credit cards. Offering a cash discount to customers who pay with cash or debit cards is one of the easiest and most popular ways to keep more money in your pocket and help your business thrive.
This article will explain how cash discount programs work and how they differ from credit card surcharges.
We’ll also review several of the best credit card processors that offer cash discount programs and explain how to properly set one up for your business.
A cash discount program offsets the cost of credit card processing fees by encouraging customers to pay in cash. The system applies a small discount (up to 4%) to transactions paid in cash. Customers using credit cards pay the full price, thus covering the payment processing costs.
Cash discount programs are most typically used in traditional brick-and-mortar businesses but can also be applied to eCommerce sales. Virtually any type of business can implement a cash discount program.
Is A Cash Discount Program Legal?
Cash discount programs are fully legal within all jurisdictions in the United States as long as all compliance requirements are met. The Durbin Amendment to the 2010 Dodd-Frank Law authorizes cash discount programs to incentivize consumers to use alternative payment methods rather than credit cards.
Cash discounting alleviates some of the burden merchants face in paying the cost of transaction processing fees. It’s important to understand that a cash discount is not the same thing as a credit card surcharge, where the cost of processing is added to the regular price at checkout if the customer uses a credit card.
While anti-surcharging laws have been repealed or overturned in most states in recent years, surcharging remains illegal in Canada and a few US jurisdictions.
Setting up a valid cash discounting program requires that you comply with federal and state law and policies laid out by the credit card associations themselves. While this isn’t terribly complicated, it can be confusing — especially if your business operates across state lines. We highly recommend that you consult with an attorney or local business consultant who can advise you of the specific requirements and limitations that will apply to your business before you start using cash discounting.
Again, you will have to comply with Canadian law and the rules set forth by the credit card associations if you use cash discounting. The Code of Conduct also allows convenience fees but prohibits surcharging. As in the United States, both cash discounts and convenience fees must be clearly disclosed in advance to the customer.
6 Best Cash Discount Programs For Small Businesses
Providers offering the best cash discounting programs are also among the best providers in general for small businesses. Although your transaction processing fees will be passed onto your customers, it’s still important to select a provider that offers high-quality hardware and software products, flexible contract terms, and excellent customer service.
National Processing: Best for cost-conscious merchants
Get a free Clover Go card reader from National Processing when you sign up. Claim your card reader.
Pros
No long-term contract if you don’t need a terminal
No monthly minimum
Full range of Clover products and services
Excellent customer service
Cons
A long-term contract is required in exchange for a free terminal
Not available to high-risk merchants
National Processing Features
Offers full-service merchant accounts
Offers credit card, debit card, echeck, and ACH processing
Accepts some high-risk industries
No long-term contract or early termination fee (if equipment purchased outright)
“Free” credit card terminal available (requires long-term contract)
Excellent reputation for customer support
National Processing Pricing
$9.95+/month account fee
$30/month for cash discounting program ($0/month if monthly processing volume is greater than $3,000)
3.99%/transaction cash discounting rate
Where National Processing Really Shines
Although it’s a relatively small company, National Processing has a lot to offer to small businesses looking to save money on their credit card processing costs. For as little as $9.95 per month, you’ll get a true, full-service merchant account. National Processing offers a full range of Clover products, all of which can be programmed to automatically apply cash discounts when a customer pays with a debit card, cash, or check.
If you already have a compatible terminal (or you’re running an eCommerce business and don’t need one), your merchant account with National Processing will come with month-to-month billing and no long-term commitment. Alternatively, the company will provide a free terminal with your account. However, the trade-off is that you’ll need to agree to a three-year contract that includes an early termination fee if you close your account early. We recommend buying your equipment outright rather than accepting the free terminal (just remember that Clover terminals cannot be reprogrammed to work with other processors’ networks).
Account fees vary by the acquiring bank/back-end processor (high-risk accounts)
Where PaymentCloud Really Shines
California-based PaymentCloud is one of the best options we’ve found for high-risk businesses that might otherwise struggle to get approved for a merchant account. The company works with a wide variety of banks and back-end processors to get you approved and has a very high success rate in doing so.
You won’t have to pay an account setup fee, and there’s no monthly minimum once you start processing. You’ll also have the option to include a free terminal with your account. Like virtually all high-risk providers, PaymentCloud doesn’t have a standardized set of processing rates published on its website, so you’ll have to obtain a pricing quote that’s custom-tailored to your business.
One word of caution: High-risk merchants typically pay processing rates two to three times higher than those paid by comparable low-risk businesses. If you wish to recoup the full amount of these fees through a cash discounting program, you’ll probably have to set a discount that’s above the 4% limit imposed on credit card surcharges. To make this work, you’ll need to raise your advertised prices by more than 4%, which might not go over very well with your customers.
Another excellent all-around merchant services provider, Host Merchant Services offers month-to-month billing and low account fees. The company primarily serves low-risk businesses but can accommodate some high-risk categories as well. Interchange-plus pricing is used exclusively, but these costs will be passed onto your credit-card-using customers if you sign up for a cash discounting program.
Host Merchant Services is one of the few providers we’ve found that discloses some pricing information about its cash discounting program. There is no monthly fee for the program for merchants processing over $5,000 per month. Those processing less than this amount will have to pay $19.99 per month. Note that Host’s cash discounting program works by adding a convenience fee to all prices, which is then discounted for non-credit card payments. Also, the company discloses that its cash discounting program will not work for tip-adjust transactions (i.e., restaurants, salons, barbershops, etc.).
Month-to-month billing with no long-term contracts
Offers SwipeSimple mobile card processing app & card reader
Offers OVVI, BLogic, and Clover POS systems
Virtual terminal included with each account
Offers choice of Traditional, Cash discounting, or Hybrid pricing plans
VizyPay Pricing
Cash Discounting monthly fees:
$25/month for merchants processing less than $5,000/month
$50/month for merchants processing $5,000 to $10,000/month
$100/month for merchants processing over $10,000/month
$25/chargeback or retrieval
$19.95/month PCI non-compliance fee
$50 Account closure fee
Where VizyPay Really Shines
A relatively new company, VizyPay is a reseller for Fiserv (formerly First Data). As such, it offers a complete line of Clover terminals and POS systems, as well as several others. VizyPay is unique in that it puts its cash discount program front and center as its primary product offering. This program replaces your traditional merchant account fee structure and processing rates with a single monthly fee. Fees vary based on your monthly processing volume:
$25 per month for merchants processing less than $5,000 per month
$50 per month for merchants processing $5,000 to $10,000 per month
$100 per month for merchants processing over $10,000 per month
While these fees might seem high, remember that they cover both your standard recurring fees (i.e., monthly account fee, statement fee, PCI compliance fee, etc.) and your processing costs for credit/debit card transactions, which are passed onto your customers. If you don’t want to go all-in on cash discounting, a hybrid program is available that only passes on the processing costs for credit card sales. If cash discounting doesn’t work for your business, VizyPay also offers a traditional processing program (i.e., no cash discounts or surcharges) that features interchange-plus pricing.
Month-to-month billing with no long-term contracts
Accepts cannabis, CBD, and other high-risk merchants
Free terminals available
Cons
Little publicly disclosed pricing information
Relatively few user reviews
Shift Processing Features
Offers full-service merchant accounts
Accepts CBD and other high-risk industries
Accepts cannabis merchants in jurisdictions where legal
Month-to-month billing with no long-term contracts
Offers a variety of EMV-compliant countertop terminals
Offers iPad-based POS system
Shift Processing Pricing
No application or account setup fees
No batch fees
No statement fees
No PCI compliance fees
Variable processing rates
Variable account fees
“Free” EMV terminals and POS systems offered
Where Shift Processing Really Shines
Another new company that focuses primarily on offering cash discounting and surcharging programs is Shift Processing. The company doesn’t appear to offer a traditional processing rate plan for merchants who’ve found that charging their customers for credit card processing doesn’t work for their business. Unlike many other surcharging/cash discounting specialists, however, Shift Processing accepts just about every type of high-risk industry, including CBD merchants and cannabis dispensaries.
There’s no application or account setup fee to get started with Shift Processing, and even high-risk businesses can be underwritten and onboarded in three days or less. Once you’ve signed up, there’s no long-term contract and no early termination fee if you close your account. The company claims to have eliminated most of the pesky recurring fees charged by other providers, although naturally, you’ll still have a monthly fee to maintain your account.
Low-risk businesses should be able to eliminate most — or even all — of their credit card processing costs with Shift Processing. However, the company is very upfront that high-risk businesses usually won’t be able to pass on 100% of their costs due to the high processing rates that the high-risk sector has to pay.
Month-to-month billing with no long-term contracts
Full range of Clover products and services
Excellent customer service
Cons
Account signup fee charged
High monthly fee for multiple terminals
NoPay.ca Features
Offers full-service merchant accounts
Serves cannabis and other high-risk industries
Month-to-month billing with no long-term contracts
Offers a variety of terminals and POS systems from Clover and others
Offers a variety of third-party payment gateways
Virtual terminal included with account
EFT processing available
Invoicing and recurring billing features available
NoPay.ca Pricing
$99 account setup fee
$65/month cash discounting program fee (+ $39.95/month for additional terminals)
Variable processing rates
No early termination fees
Processing hardware available via purchase or month-to-month rental
Where NoPay.ca Really Shines
NoPay.ca is the cash discounting program offered by KIS Payments, a new Canadian merchant services provider. This program includes a Clover terminal and the Clover Cash Discount app, automating the process of applying cash discounts to your transactions.
KIS Payments bills on a month-to-month basis and does not require a long-term contract of any kind. Terminals are rented rather than sold outright or leased. As with any Clover device, you’ll have to pay a monthly software subscription fee to use the product. The company currently charges $65 per month for a single terminal or POS system, while additional terminals will cost an extra $39.95 per month each.
Note that this fee is the only one you’ll have to pay and includes equipment rental, software licensing, account maintenance, PCI compliance, and any other recurring expense you might incur. It does not, however, include chargeback fees or any other type of incidental fee. There’s also a one-time signup fee of $99, which is fully disclosed on the company’s website.
Merchant Maverick has been researching the payment processing industry since 2009. Our writers have reviewed hundreds of credit card processors, merchant account services, and mobile payment apps, evaluating each provider carefully on several different metrics.
When comparing different payment processing companies and applications to one another, we consider numerous data points. Our experts start by comparing credit card processing rates, the presence of additional fees, contract length, sales practices, and the presence or absence of additional features and services, like point of sale software. Each provider is judged on its own merits and how well it stacks up to industry standards; then it is weighed against the other providers on the list.
We spend an average of 10-15 hours researching and updating each one of our lists, making sure every company or application included meets our internal standards for quality and reputation. Any list of recommended payment processors on our site might contain a mix of standard merchant accounts, third-party payment processors, mobile payment devices, and high-risk payment processors, depending on what our expert feels is the best fit for certain scenarios or business types.
For additional details about Merchant Maverick’s review and rating processes, please refer to any or all of the following methodology pages:
3 Things To Know Before Implementing A Cash Discount
Switching to a cash discounting program is a significant change from traditional credit card processing, where the merchant absorbs the full cost of processing transactions and maintaining a merchant account. Before you decide to give cash discounting a try, you’ll want to ask yourself the following three important questions to determine whether this is a good idea and how to go about setting up a program. Here’s some information to help you make a more informed decision:
Is Cash Discounting A Good Strategy For Your Business?
One unavoidable truth about cash discounting is that this method works better for some business categories than others. You should be very wary of any provider that tries to tell you that it’s a great idea for any business and pressures you to sign up for their program (especially if that program comes with a hefty monthly fee).
Cash discounting is generally more common and accepted in the services industries than in traditional retail businesses. Many of the providers we’ve profiled above publish a list of industries that are particularly well-suited to cash discounting. You should check out these lists, even if you’re not planning to sign up with that particular provider.
We also recommend that you take a close look at your current credit card usage rate in determining whether it’s a good idea or not. Cash discounting generally works best for businesses that already have a low credit card usage rate. Just be aware that if your customers already tend not to use their credit cards, you won’t save much money by implementing cash discounting.
How Do You Get Started With Cash Discounting?
While payment processors are more actively marketing cash discounting programs, the truth is that any merchant services provider can set you up with a discounting program, even if they don’t advertise it. When choosing a program, your first candidate should be the provider you’re currently using (if you have one). It will be much easier to switch to cash discounting with your current provider than to have to deal with all the hardware, software, and contractual issues that come with switching to a new provider altogether.
The actual process of setting up your cash discounting program consists of three easy steps:
Sign up for the program.
Have your processing hardware (and payment gateway, if applicable) reprogrammed to process cash discounts automatically.
Post the required signage and notices in your store and on your website (if applicable).
That’s it! Switching to cash discounting shouldn’t take more than a few days, depending on how quickly your provider can reprogram your current hardware. eCommerce-only businesses can make the switch in less than a day.
A note on cash discount signage: Retail merchants must post adequate signage at the entrance to their stores and at the point of sale, notifying customers that they will receive a discount from the advertised price if they use a payment method other than credit cards. Your provider can often furnish you with some official-looking signs, or you can print your own.
Just be aware that no matter how carefully you do this, a disheartening number of your customers will never read them. This is the real reason that cash discounting is preferred over surcharging — customers who haven’t read the signs will be much happier to get an unexpected discount for a cash payment at checkout than if they have to pay an extra fee that they weren’t expecting.
What Are The Requirements To Implement A Cash Discounting Program?
In running a cash discounting program, you’ll need to comply with both applicable state and federal laws and the cash discounting policies set forth by the credit card associations. While legal requirements are pretty minimal, credit card associations are a little more demanding. Be sure to review the policies for every type of credit card you accept.
You won’t need any special hardware to get started with cash discounting. Virtually every credit card terminal, mobile card reader, and point of sale (POS) system on the market can be programmed to automatically apply a cash discount if a non-credit card payment method is used. If you’re using a Clover product, it’s as simple as downloading and configuring the Cash Discounting app from the Clover Marketplace.
We’ve discussed the requirement to post adequate signage above, but it’s important to reiterate that you should make sure you’ve posted your signs (or website banners) before you actually start applying cash discounts.
If you have employees, it’s important to ensure that they are properly trained and know the rules that apply to cash discounting. While your terminals should automatically apply discounts, employees are still your first point of contact with your customers. They need to be able to resolve any disputes about cash discounts that might arise.
Finally, we’d caution you against trying to implement your own home-grown cash discounting program to avoid your provider’s monthly fees. Manually calculating and applying a cash discount is risky and prone to errors, so don’t do it.
Trying To Lower Your Merchant Fees? Alternatives To Cash Discount Processing
Although cash discounting can be an effective way to lower your credit processing costs (down to zero, in some cases), it’s not the only way to achieve this goal. Here are some alternatives to cash discount processing to consider before deciding to implement a cash discounting program:
Raise Your Prices To Cover Your Processing Costs
Merchants have been quietly using this strategy for years to offset the cost of credit card processing, even though it penalizes customers who pay in cash. It’s essentially the same thing as cash discounting — but without the discount. While it’s easy to implement and completely legal, it can also depress sales and leave you at a competitive disadvantage against other merchants in your industry who can offer lower prices. If you’re just going to increase your prices and call it good, we highly recommend that you only raise them by the actual percentage of your monthly sales volume that goes to covering processing costs.
Implement A Convenience Fee For Credit Cards
Another popular and completely legal way to lower your processing costs is to add a convenience fee for customers who pay with a credit card. This is not the same as a surcharge, as it’s a fixed per-transaction fee and isn’t based on the actual processing rate. Please see our article, What Is A Convenience Fee & Can You Charge One To Your Customers, for more information on this subject.
Use Credit Card Surcharging Instead Of Cash Discounting
In recent years, most anti-surcharging laws across the country have been repealed. Adding a surcharge when a customer uses a credit card is now a viable option in all but two states in the US (note that the practice is still illegal in Canada). However, surcharging is decidedly less popular with consumers than cash discounting and can potentially put a real dent in your sales volume. Although many businesses have successfully implemented surcharging, it might not be the best choice for your business.
Switch To A Better Merchant Services Provider With Lower Rates
If you’re already paying too much for credit card processing, this may be the best idea of all. Combined with modest price increases, you can cover your processing costs without passing them directly onto your customers through a surcharging or cash discounting program. Check out our recommendations for the cheapest credit card processors in the industry for some great companies to consider.
Does Your Business Need A Cash Discount Program?
The interchange fees charged for credit card processing are high and getting higher all the time.
Although the COVID-19 pandemic delayed rate increases by Visa and Mastercard until 2022, those rates have now gone up — and may continue to do so. eCommerce businesses have seen particularly steep adjustments due to the dramatic rise in online fraud in recent years.
There is currently a strong push within the payments industry to sell cash discounting programs to merchants as a way to save money. Unlike the problem of higher interchange fees, you can’t blame the credit card associations for this phenomenon.
Visa, Mastercard, American Express, and Discover all dislike cash discounting because it disincentivizes customers from using their credit cards. Likewise, the issuing banks hate it because it directly deprives them of lucrative interchange fees when customers put their credit cards back in their wallets and use a different payment method to get a discount.
So who really benefits from cash discounting (besides you, of course)?
Of all these business entities, your merchant services provider has the most to gain when merchants use cash discounting. Besides the sometimes-hefty fees they can charge for the program, providers will typically enjoy a much higher markup on credit card transactions than they would with traditional processing. After the interchange fees have been paid, providers can often keep a profit of 1.5% or even higher. Compare this to the 0.30% (or lower) markup that they might typically receive for a traditional interchange-plus processing rate.
Cash discounting hurts your credit card-using customers — not because they have to pay their fair share of the processing costs, but because they have to pay significantly more.
Let’s put it this way: Would you sign up with a merchant services provider that would charge you a flat 4.0% for every credit card transaction? Probably not, right?
With all that said, cash discounting programs can benefit merchants in some industries where the practice is common and won’t put you at a competitive disadvantage. Just be careful about which provider you sign up with, and look for one that doesn’t charge a monthly fee for their program.
A cash discounting program is a service that passes the cost of credit card processing onto card-using customers at the point of sale. Rather than add processing costs onto the customer’s bill, however, cash discounting programs subtract these costs if a non-credit card payment method is used.
How do cash discounting programs work?
With cash discounting, the advertised price of an item will include all applicable credit card processing costs. If the customer uses a payment method other than a credit card (e.g., debit card, cash, paper check, etc.), a discount is automatically applied to remove the additional processing fees included in the displayed price.
Is a cash discounting program legal?
Yes. Cash discounting is legal in all US jurisdictions and Canada. However, the merchant must comply with all applicable local regulations and policies the credit card associations set forth. Primarily, cash discounting must be prominently displayed using in-store signage or website banners to alert consumers that they will receive a discount if they choose to pay using a non-credit card payment method.
What is the difference between cash discounting and surcharging?
Unlike cash discounting, surcharging adds the cost of credit card processing to the advertised price at checkout if a customer chooses to pay with a credit card. Statutes prohibiting the use of credit card surcharging have been overturned in recent years in all but two US states (Connecticut and Massachusetts). However, the practice remains illegal in Canada.
Why would a business use a cash discounting program?
Businesses use cash discounting to lower their overall credit card processing costs by passing the transaction processing costs onto their customers who choose to pay with a credit card. Note that the merchant is still responsible for paying all recurring and incidental fees required to maintain a merchant account. Also, note that cash discounting may result in lost sales when customers realize that a purchase will cost them more if they pay by credit card.
Frank has been writing about payment processing and business services since 2015. He is a retired Air Force officer and a former practicing attorney. He has a Bachelor of Science degree in Psychology from The Pennsylvania State University and a Juris Doctorate degree from the Ventura College of Law, and currently resides in Paso Robles, California.
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Merchant Maverick’s ratings are editorial in nature, and are not aggregated from user reviews. Each staff reviewer at Merchant Maverick is a subject matter expert with experience researching, testing, and evaluating small business software and services. The rating of this company or service is based on the author’s expert opinion and analysis of the product, and assessed and seconded by another subject matter expert on staff before publication. Merchant Maverick’s ratings are not influenced by affiliate partnerships.
Our unbiased reviews and content are supported in part by affiliate partnerships, and we adhere to strict guidelines to preserve editorial integrity. The editorial content on this page is not provided by any of the companies mentioned and has not been reviewed, approved or otherwise endorsed by any of these entities. Opinions expressed here are author’s alone.
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