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Surcharging and Cash Discounting, What’s the Difference?

This is the first in a series of episodes to educate you on cash discounting and surcharging. Cash discounting is a huge opportunity right now in our industry. Everybody in our industry seems to get excited about selling. However, too often they don’t know what they’re talking about! So, I decided to dive into […]


This is the first in a series of episodes to educate you on cash discounting and surcharging.  Cash discounting is a huge opportunity right now in our industry.  Everybody in our industry seems to get excited about selling.  However, too often they don’t know what they’re talking about!  So, I decided to dive into a ton of research on this topic.  I’ve read laws, researched different programs offered, gateways, and every aspect.  This series comes to you after hours and hours of preparation and research.  In this first episode I’ll discuss the difference between cash discounting and surcharging.  Then in the next six episodes I’ll get more in-depth.  I’ll explain what it is and how to sell cash discounting.

Read the previous Blog here: http://bit.ly/2zg00l1 How to Overcome the Objection _I’m with my bank_ When Selling Credit Card Processing – Revisited

I strongly encourage you to visit CCSalesPro.com and click on “find processors.”  Schedule a call.  Please allow me to explain which processors you want to use for the type of businesses you are selling and how much cash discounting you offer.  Cash discounting varies greatly from processor to processor.  My thorough research has enabled me to know which processors offer a good program.  I enjoy doing all this content and interacting with you.  Let’s talk about the right processor to use for cash discounting and surcharging.

  • What IS cash discounting and surcharging? What is the difference between them?

Before we dive in deeper, I’ll give you the difference that really matters.

Cash discounting:  The merchant can charge more for any card transaction than for a cash transaction.  It’s simpler than surcharging and better for the merchant.

Surcharging:  There are very specific stipulations.  Merchants are not allowed to surcharge check card or debit transactions or American Express.  There are also other regulations and rules which create a lot of confusion.

In my opinion, surcharging is dead for the time being.  If you are selling surcharging, I suggest you stop.  It’s a losing battle.  Surcharging is more complicated to explain and sell.  If you do make a sale, somebody will come right behind you with cash discounting.  Their pitch will be, “You are adding this percentage for all your transactions except check card.  Let’s just do the check card, too.  I offer a cash discounting.”  I believe three to five years from now, surcharging will be back.  There will be more regulation in place to make that possible and transparent.  But right now, cash discounting is working, and everybody is selling it.  How to sell surcharging  isn’t a sensible knowledge.  It’s dead.

  • Let’s dig deeper into the difference between these two things.

The legal history will help you understand the situation:

Surcharging:  There was a lawsuit filed against Visa and MasterCard.  As a result of that trial, there were laws passed which stated the rules of Visa and MasterCard were not Constitutional.  A federal law was passed which gave permission for merchants to surcharge but only on credit card transactions.  In spite of the federal law, all states are allowed to over-ride it!  In ten states (most of the largest included) surcharging is not allowed.  Obviously, this is a big problem.

Cash Discounting:  Cash discounting basically provides a discount to encourage the use of cash payment.  In doing my research I discovered that cash discounting is also passed by law in the Durbin Amendment.  We already know this amendment regulates money charged and interchange fees for check cards and debit cards.  Here is an excerpt from the Durbin Amendment which also pertains to cash discounting:

“Limitations on restrictions on offering discounts for use of a form of payment.  A payment card network shall not directly or through any agent, processor, or licensed member of the network by contract, requirement, condition, penalty, or otherwise inhibit the ability of any person to provide a discount or, in kind, incentive for payment by the use of cash, checks, debit cards, or credit cards to the extent that…”

This is very good news for cash discounting!  It is lawful.  None of the card brands and banks can inhibit a business owner from providing a discount for cash payment.  The language is broad, so it allows for quite a bit of flexibility.  At the time of this episode cash discounting is allowed in all fifty states because of the Durbin Amendment law.

There are two possible situations with cash discounting of which you should be aware and keep in mind.

  1. The Durbin Amendment was almost repealed recently. As part of the new financial reform act in Congress, this is still a possibility in the future.  In this case, there would be no law to prohibit cash discounting, but neither would there be a law to protect it.
  2. The language used in the Amendment is for card brands and banks. A state could still impose regulations concerning cash discounting.  At this time, I found no regulation or mention of the issue in any state.  However, a consumer watchdog group might cause that to change at any time in an individual state.

Not only is cash discounting allowed by the federal law, but businesses may also encourage other particular forms of payment.  Business owners may also decide to encourage payment with check or credit card.  Or they may prefer to do cash discount on credit cards only.  As of now, there is legal freedom in this area.

  • What is a cash discount versus a surcharge?

Both are easily understood.  To charge more money for the use of a card is a surcharge.  Getting a discount to pay cash is cash discounting.  Surcharging is much more specific because of the court case from a few years ago.  Cash discounting sometimes becomes confusing in the way merchants communicate it.  The employees must be educated carefully in the proper wording.  One case went to the Supreme Court of the United States because of this issue.  It is of the utmost importance!

To use cash discounting, employees must use very specific wording.  And business owners must have obvious, clear signage to notify customers.  When customers are ready to check out, employees must NOT say, “If you use your card, the price is $0.60 more.”  Visa and MasterCard hate the cash discounting and would certainly sue for such statements.  The proper wording would be, “Would you like to pay cash and save $0.60?”  The signage in the business should say, “All prices represent the cash discount.”  These notifications should be visible everywhere in the business.

At the time of the court case involving surcharge, there was much excitement in our ranks.  However, the second thought was that cash discounting is easier, less specific, and protected by the Durbin Amendment.  So, surcharging in my opinion is dead.  Don’t sell it anymore.  Let’s move over to cash discounting.

Don’t miss the rest of this series.  I’ll be sharing more of my research findings to help you.  You need to know how to sell cash discounting.

Read the next article here:  http://bit.ly/2CmFTnu  STOP End of Month Billing for Cash Discounting




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