Updated on November 22, 2021
Question: What is the Cash Discount Program?
Answer: This is a process by which a merchant offset few or all of his present merchant service fees without increasing the overall rates. It is a technique for actualizing a service fee to all customers, while giving a discount to those individuals who pay with cash. By doing this your posted rates will turn into the rate for those who pay with cash. Those customers who pay with cash avoid the services fee and all others will see the detail added to their receipt. It is our exclusive innovation that enables this to happen and keeps you within the rules of Visa, Mastercard, as well as processor regulations.
Question: Is it legal to offer a Cash Discount?
Answer: The spokesman for the Federal Trade Commission, Mitchell Katz, said in May of 2011 that: The Dodd-Frank law prohibits a payment card network like Visa “from inhibiting the ability of any individual to give a discount for payment by cash, checks, debit cards, or credit cards,” said Katz. “Neither surcharging, nor a cash discount is unlawful.”
Question: Is this a kind of new program?
Answer: No, in fact it’s been around for decades in Europe and is being used in 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 more than 15 years. Numerous national, state and local governments including the DMV, Secretary of State, Post Offices, Schools, Courts, and the IRS implement a Service Fee.
Question: What do I need to do to make sure I’m using this program effectively in my business?
Answer: To effectively actualize a Cash Discount program, you don’t have to change any of your prices, all you need to do is to post a signage (that we will provide) that expresses that all transactions now carry a 3.5% customer service charge if they don’t pay with cash, check or pin debit.
However any consumer, who pays with cash, will have this fee waived. Your posted prices are your cash price. Consumers who pay with a method other than cash will see a 3.5% cash discount fee recorded on their receipt at the register. The extra 3.5% service charge is programmed into your terminal, so you don’t need to take any extra step.
Question: I heard that it’s illegal to charge a fee if someone make use of a credit card?
Answer: Not until recently, Visa and MasterCard regulations made it clear merchants couldn’t charge more to a shopper who utilized a credit card or other payment method. Because of a 2013 claim against the card networks, merchants are not permitted to force an extra charge in all but 10 states and Puerto Rico. We’ll address the extra charge in the following inquiry beneath.
In any case, there has always been a stipulation in the Visa and Mastercard regs that take into consideration a discount while paying with cash.
While this may appear like an issue of semantics, it’s essentially adhering to the wording of the Visa and Mastercard regulations that permit the cash discount program to be actualized.
Here’s the verbiage specific to both Visa and Mastercard Rules and Regulations:
Keep in mind, your stated price now conveys a 4% Service Fee, so when somebody pays with cash, they are getting a discount off the stated price, not an increase when they pay with credit or different methods of payment.
Question: Is this the same thing as a Surcharge? I hear that’s only allowed in certain states.
Answer: No, the Cash Discount program, while apparently comparative, is in reality very different, especially according to Visa and MasterCard. As specified in the former Q&A, the 2013 decision against the card networks brought about merchants now having the capacity to actualize an additional charge. The additional charge is permitted in all except 10 states (California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas, in addition to the U.S. region of Puerto Rico).
Those states mentioned claims that an extra charge is not fair for shoppers. We discover it to be ridiculous that it’s not fair for shoppers to pay for the cost merchants incur to give goods and services while it’s been consummately OK for merchants to pay for the reward programs associated with the credit cards that consumers utilize.
You do understand that privilege? Each time you see a promotion on TV, in print, or hear on the radio that discuss the benefit and rewards related with a specific credit card, those benefits come as higher Interchange rates that merchants pay to be able to acknowledge those cards. The increase in charges is not brought about by the card issuing banks or credit card processors – merchants pay for it!
The Surcharge comes along with several stipulations which are listed below:
- Only credit card might be surcharged and not debit cards
- Signage must be posted for at least 30 days before executing an extra charge, so that your customers will be aware.
- A maximum of 3.5% to 4% can be imposed.
- Surcharging is only permitted in states where the program has not been excluded
With the Cash Discount program, if this limitation is not in place, as you are not charging an extra fee for accepting a credit card, you are giving a discount to those individuals who pay with cash. This is a reasonable distinction, and one that Visa, Mastercard, and the courts have all agreed upon:
In this program, a service charge of 3.5% to 4% is attached to all prices in your store. The posted prices are your cash price. The individuals who pay with cash don’t need to pay this fee. This is not a circumstance where the individuals who pay with a credit card pay more.
As Mitchell Katz, representative for the Federal Trade Commission, said in May of 2011: The Dodd-Frank law denies a payment card network such as Visa “from inhibiting the ability of anybody to give a discount to payment with cash, checks, debit cards, or credit cards,” said Katz. “Neither surcharging, nor a money markdown is unlawful.”
Is this a semantics contention? We’ll give you a chance to choose, however in particular, Visa, Mastercard, and the courts take into consideration this refinement.
Question: Why don’t I just implement the program myself?
Answer: When an expense is erroneously applied to a transaction, any extra fee charged to those shoppers utilizing a credit card is named a Surcharge and that is explicitly illegal by Visa, Mastercard, and the processing provider without making specific steps (see past question)
The way around this process is to allow us to automate a Cash Discount Program for you which is not quite different from the surcharge. In the Cash Discount Program you post signage expressing that all consumers will now be paying a 4% Service Fee, however for those paying with cash, the fee will be waived. We will automate your hardware so that this fee is consequently added for those customers utilizing any other method of payment other than cash (basically credit cards). While this may seem to be the same with the Surcharge Program, it is distinctively unique in that everybody is paying an increased fee, the individuals who pay with cash get a discount, however, with the Surcharge program, you are specifically stating that those paying with credit cards will pay more. In particular it is lined up with the rules of Visa and Mastercard.
Also, you are forbidden by Visa, Mastercard, and the Processor’s rules to benefit on a credit card transaction, which could happen in the event that you accidentally charged more than you were being charged by the processor. By using the Cash Discount program, we establish an appropriate pricing for you to guarantee you remain within every guideline.
Question: Won’t my customers be upset by this fee and want to go elsewhere?
Answer: While no one needs to pay additional fees, an ever increasing number of customers are beginning to acknowledge how costly it’s been for merchants to accept credit cards. By charging a 4% expense on a sales transaction, this is a little cost for customers to pay for the goods and services being offered. Also, (if paying that expense or Implementing the Cash Discount Program) enables you to remain in business and keep your general costs lower, it’s a little price to pay.
Actually, surveys have demonstrated that more than 80% of respondents expressed they wouldn’t mull over paying that sum (just $1.00 on a $25.00 transaction) for the comfort of utilizing their credit card as opposed to carrying money along with them. However, we are all aware that few of us are conveying money nowadays and everybody adores the reward related with their credit cards.
Furthermore, we’ve all turned out to be acclimated to paying $2-4 when we utilize an ATM and this cash discount fee is far cheaper than the ATM charge for most transactions.
In the event that you clarify that the Cash Discount program is a way for you to continue giving quality products and services without increasing your general costs, most customers have shown they comprehend and comply with it. And again, a 4% fee on an individual transaction has a minimal impact to the customer, but for you as a merchant, saving it is quite crucial.
Question: What if I don’t like the Cash Discount Program after a few days, weeks, or months?
Answer: On the off chance that for any reason you wish to suspend the Cash Discount Program, we will promptly change you back to conventional Interchange Pricing. If you’re not happy for any reason whatsoever then we can put you back on regular processing program with lower fees than you’re currently paying.
Question: Why do we offer the Cash Discount Program?
Answer: Since we started, we’ve been an advocate acting so as to provide the best for our merchants, savings our customers millions of dollars a year which is quite amazing. The Cash Discount offering makes a way to spare our customers offering create a special path to save our client every month. With the addition of this program, we have numerous alternatives for our customers to pick from – you pick the savings plan that best suits your business. Get some information about Hybrid choices on the off chance that you’d like to cover some of the cost while charging your customers a few however not all the fees.
Question: What if I have a terminal lease?
Answer: Terminal lease frequently have incredible high rates with respect to the underlying piece of equipment you are “renting.” For example, it’s normal to see a rent on a desktop terminal for $79 every month for 5 years. The retail cost of the equipment is regularly just $300-400 and the cost of that terminal will be $4740 when it’s altogether paid off!
So when you know the fact of the matter it’s sickening to make that $79 payment, yet in the event that we can spare you $300 or perhaps $3000 every month in processing fees, it turns out to be much easier to stomach. It is far better to start making the installment payment as soon as possible.
Question: What if I am under contract?
Answer: Like the past FAQ on terminal leasing, sometimes cancellation fees can be insultingly high (side note: we never has a cancelation fee!). In any case, regularly you can wait up to a month in the wake of switching before the fee catch up with you, and by then you will have spared fundamentally on the new program. In the long run you will be obviously better off to switch and begin sparing at the earliest opportunity.
Question: Will a Cash Discount Program totally eliminate my monthly card processing fees?
Answer: Most merchants will see some little fees on their bill as it’s difficult to get every transaction to zero out totally in view of variance in the Interchange billing structure. All things considered, we commonly observe the monthly fees drop down below $100 every month, regardless of the possibility that previously the fees had been a few hundred or even a few thousand dollars!
Remember that in the event that you need to get a statement where the net dollar sum in fees is as close to zero as possible, we will set you up with a daily billing plan. That implies on a $25 transactions, you get 4% for an aggregate sales amount of $26. You will get $25 in your record the next day and the 4% fee would have been subtracted out. Toward the end of the month, you’ll have the net cost of your goods and services in your bank account with minimal processing fees.
Question: I have a high average sale amount and the 4% might be viewed as being too high for my customers to stomach. Couldn’t I absorb some of that fee and still save at the same time?
Answer: On a case by case basis, we will work with you to actualize a hybrid solution where you charge a Service that suit range from 1-4% to your shopper and you.
Question: Can the credit card companies allow a program like this in the future?
Answer: Yes, while we are still operating under Visa and Mastercard rules, there is nothing keeping them from changing their regulations later in the future. The program has being in use in the US for about 4 years without any signs that either Visa or Mastercard will make any change so as to prevent it, however, it is still possible.
In the event that the programs were to be disallowed, we would essentially change you to our low cost, Interchange Plus program where you’d pay the lowest rate possible within the card processing framework.
Question: Where can I learn more?
Answer: Here are a few links on the subject of the Cash Discount Program, Surcharging, and Visa/Mastercard directions. They express the opinion of the authors regardless of the AdvoCharge:
Question: Who can I call to try out the Cash Discount Program?
Answer: We recommend you call Mr. David Gilliam who currently represents the majority of the cash discount programs in the U.S. You can reach him at 1.866.626.2702
https://usa.visa.com/dam/VCOM/download/about-visa/visa-rules-public.pdf
https://www.mastercard.us/en-us/about-mastercard/what-we-do/rules.html
http://www.creditcards.com/credit-card-news/business-surcharge-card-customers-1585.php
http://www.cleveland.com/business/index.ssf/2011/05/can_stores_offer_a_discount_if.html
https://www.cardfellow.com/checkout-fees-charging-credit-card-fees-to-customers/
https://www.cardfellow.com/charging-customers-a-credit-card-convenience-fee-at-check-out/#Guidelines
https://www.bloomberg.com/view/articles/2017-01-10/cash-discounts-credit-surcharges-and-free-speech
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