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Xsellarate Blog

WRITTEN & RESEARCHED BY

Jon Millikan

Expert Analyst & Contributor

Credit Card Surcharge VS. Cash Discount

Updated: Sep 29, 2023


Credit Card Surcharge vs Cash Discount

In the world of payment processing, two terms that you may have heard are "surcharge program" and "cash discount program." While these two terms may sound similar, they actually refer to two different strategies for handling merchant services fees. In this article, we will explain the difference between surcharge programs and cash discount programs, and how they can affect your business.


What is a surcharge program?

A surcharge program is a payment processing strategy that allows merchants to pass on the cost of credit card processing fees to the customer. In a surcharge program, merchants add a fee to the purchase price when a customer pays with a credit or debit card. This fee is usually a percentage of the total purchase amount, and it is designed to cover the cost of merchant services fees.


What is a cash discount program?

A cash discount program is a payment processing strategy that rewards customers for paying with cash. In a cash discount program, merchants offer a discount to the purchase price when a customer pays with cash. This discount is usually a percentage of the total purchase amount, and it is designed to incentivize customers to pay with cash instead of credit or debit cards.


What is the difference between surcharge programs and cash discount programs?

The main difference between surcharge programs and cash discount programs is the way they handle merchant services fees. In a surcharge program, merchants add a fee to the purchase price when a customer pays with a credit or debit card. This fee is designed to cover the cost of merchant services fees, which means that the customer is paying for the fees directly. In contrast, in a cash discount program, merchants offer a discount to the purchase price when a customer pays with cash. This discount is designed to offset the cost of merchant services fees, which means that the merchant is paying for the fees indirectly.


Which is better for your business?

The answer to this question depends on your business model and your customers' preferences. Some customers may be willing to pay a surcharge in order to use their credit or debit cards, while others may prefer to pay with cash and receive a discount. Additionally, the legality of surcharge programs varies by state, so it's important to check your local laws before implementing a surcharge program.


It is important to note, that surcharge also raises the total processing amount which is still subject to the rates levied by the credit card companies. By simply raising the rates of the purchase price, you as the merchant, will still be responsible for the percentage adjustment. This is why it is always beneficial to incentivize cash transactions.


Ultimately, the decision to use a surcharge program or a cash discount program is up to you. Both strategies can help you offset the cost of merchant services fees, but they work in different ways. By understanding the difference between these two programs, you can make an informed decision about which one is right for your business.

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Jon Millikan

Expert Analyst & Contributor

Jon has been writing for Xsellarate about small business solutions and financing since 2022. He started writing professionally about business related topics in 2012. Jon has been featured in Business Insider, OC Journal, the OC Wave, Entrepreneur Magazine & other publications. He has a bachelor's degree in Business Administration from California State University Monterey Bay and currently resides in Huntington Beach, California.

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