This brings them under the card brand rules for surcharging Instead, a true “cash discount” program must increase the price listed on the shelf and then reduce it at the register when customers choose cash.” “The bottom-line is that most purported “cash discount” programs are non-compliant because they list the cash price on the shelf and then add a fee at the point of sale. Like Visa, Razi is unequivocal in his explanation. “The term “surcharge” means any means of increasing the regular price to a cardholder which is not imposed upon customers paying by cash, check, or similar means.” Razi confirms, “If the price on the shelf is $10.00, any fee added at the register constitutes a “surcharge” under U.S.C. Paying less than the posted price is a discount. (Remember our rule of thumb from the beginning. So, if a business posts a $10.00 price on a shelf, they would need to charge cash-paying customers less than $10 at the register in order to be offering a cash discount. The “posted price” refers to prices posted on shelves, menus, invoices, or in advertisements. “ The term “regular price” means the tag or posted price charged for the property or service if a single price is tagged or posted…” CardX founder and CEO Jonathan Razi, a Harvard Law School graduate, explains that the definition of “regular price” comes from the Truth in Lending Act, specifically U.S.C. We also reached out to CardX, a company that specializes in surcharge programs and has led the charge in making such programs available in more places across the country. However, if the regular price is the cash price, then no discount on the regular price is being offered. Some processors may argue that the “regular price” is the cash price. This section clarifies that a discount must be a reduction in price – not an increase in price. The Cornell Law website defines “discount,” stating: “The term “discount”- (A)means a reduction made from the price that customers are informed is the regular price and (B)does not include any means of increasing the price that customers are informed is the regular price.” Visa’s statement squares with definitions found in the Durbin Amendment, which states that payment card networks will not restrict business’ ability to offer a discount for cash and check payments. Businesses can offer a lower price from that posted (card) price as a cash discount. In this statement, Visa clearly explains that a business offering a cash discount is allowed, but that the posted price must be for cards. However, merchants are not permitted to post a price for cash, and then charge a higher price for cards.” The rule states the posted price must be for cards, however, merchants can provide a lower price for cash acceptance. When asked about cash discounts, Visa told CardFellow: “ A discount for cash is different from a surcharge. However, Visa provided a clear statement. At the time of publication, Mastercard has not replied to CardFellow’s request for clarification on cash discounts. Sources – Visa, the Durbin Amendment, CardXĬardFellow reached out to Visa and Mastercard to confirm the distinction between cash discounting and surcharging. If they pay more than the shelf price, it’s a surcharge. So keep in mind the quick rule of thumb – if the customer pays less than the shelf price, it’s a discount. Getting it wrong means risking fines or having your merchant account shut down. While it may sound like a minor difference, it’s actually very important in terms of legality and compliance with card brand rules. Even if a processor tells you that you’re simply adding a “service fee” or a “non-cash adjustment,” it is still a surcharge. ![]() ![]() ![]() If you charge more at the register than the listed price, it is a surcharge, regardless of what processors call it. In the second case, they pay more than the listed price. In the first situation, a customer pays less than the listed price. Sources: Visa, the Durbin Amendment, CardXĪ cash discount is when you post credit card prices and offer a discount on that price for customers who pay with cash.Ī surcharge is when you post cash prices and charge an additional fee on top of that price for customers who pay with a card.Let’s look at the differences between the two and how you can stay on the right side of laws and card brand regulations. The longer answer is that there’s a lot of confusion about the difference between “cash discounts” and “surcharges,” or “checkout fees” and that confusion has led to labeling surcharge programs as cash discount programs. The short answer: yes, when done correctly. Are they legal and are they permitted in merchant agreements? ![]() Credit card processing companies are popping up left and right offering “cash discount” programs to eliminate your credit card processing fees.
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