Surcharging and Cash Discounting Merchant Processing Costs

Credit card acceptance provides a feasible way for patrons to pay for goods and services without using cash. The added convenience is not equally rewarding for merchants. To offset the cost of card payment acceptance, surcharging and cash discounting are used by some store owners.

About Surcharging and Cash Discounting 

Business owners are receiving a larger percentage of electronic payments versus transactions that are paid for with cash.

The Covid-19 pandemic caused a variety of health-related concerns, where people did not want to touch coins, paper bills or items that were handled among other folks.

Shoppers overwhelmingly elected to pay for items via EMV-chip card reading devices that allow users to dip, tap or to swipe credit cards and debit cards.

Merchants are charged a credit card processing fee that is based on several factors. Smaller transactions may cause a merchant to incur a disproportionate amount of fees, which usually leads to lower profits on inexpensive items.


Raising the prices for all of a store owner’s inventory to account for the cost of card payment expenses would be unfair to cash buyers.

Surcharges are not applicable toward debit card transactions or cash payments.

Therefore, merchants may apply a surcharge for transactions that are settled with a credit card.

To balance the expenses for surcharges, a merchant might offer a discount for customers who pay for goods with cash.

Surcharging Compliance for Merchants

Merchants are advised to follow industry-recognized regulations for credit card transactions that will include surcharges.

Many states allow store owners to increase a consumer’s costs of goods or services via surcharges.

However, surcharges are prohibited on credit cards and prepaid cards in Colorado, Connecticut, Kansas, Maine, Massachusetts, and Oklahoma.

Merchants cannot apply a surcharge that increases a consumer’s transaction cost by more than their cost of acceptance with a four percent maximum.

Store owners should post signage that informs shoppers about surcharges that will result from credit card transactions.

Additionally, a merchant must provide each consumer with a receipt that clearly reflects the amount of the surcharge.

Before implementing a program to impose surcharges, a merchant must advise their credit card processor and the card brands within 30 days of the start date.

Risks of Credit Card Surcharging and Cash Discounting

In some instances, consumers may be confused with surcharging and cash discounting.

While the fees for credit charges might be prominently displayed, some customers may dislike the concept and decide to shop at competing stores that do not participate in surcharging.

Without adding surcharges, a merchant may continue to incur losses on credit card payments for low-ticket checkout amounts.

Unfortunately, merchants who aim to offer cash discounting as a way to offset merchant processing costs might offend customers who are subjected to credit card surcharging costs.

An environment that promotes better pricing for cash-based payments creates other issues, such as managing cash-on-hand, security issues and potentially more trips to a local bank.

Reaching a happy medium is essential for business owners who want to save money on merchant processing costs, while avoiding the loss of valuable customers.

Considerations for Surcharging and Cash Discounting 

Credit card acceptance offers many benefits for store owners.

However, the decision to offer surcharging or cash discounting will vary among merchants.

Speaking with a merchant account representative about practical options for payment processing is a great way to gain more insight toward pleasurable checkout experiences.

Valued Merchant Services offers unmatched credit card processing fees for business owners who are focused on improving profitability and their bottom line.

Knowledgeable account representatives can discuss surcharging, cash discounting, overall merchant processing costs, safe practices, compliance and point-of-sale equipment options.

Contact Us today for more details about affordable credit card acceptance.

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