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Xsellarate Blog

WRITTEN & RESEARCHED BY

Jon Millikan

Expert Analyst & Contributor

How does Cash Discount Processing work?


Cash Register and stacks of cash

Cash discount processing is an innovative type of credit card processing that enables merchants to provide discounts to customers who pay with cash or check. This system allows merchants to reduce their processing costs for card transactions. Here is an in-depth look at what cash discount processing is and how it works:


Is Your Business Currently Utilizing Cash Discount?

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  • Cash discount processing allows merchants to charge credit card customers the standard, full price while offering a discount (usually 1% - 3%) to cash and check customers.

  • The discount essentially comes out of the fees merchants pay to card networks on credit/debit transactions. So it offsets their processing costs.

  • This model incentivizes customers to pay with cash or check, which results in lower processing expenses for merchants. Those savings can be passed along in the form of cash discounts.

How Do Cash Discounts Work?

  • With traditional credit card processing, merchants pay a percentage fee (interchange fee) on every card transaction. This fee ranges from 1.5% to 3%, with an average of about 2%.

  • With cash discount processing, merchants can charge card customers the standard price while giving cash customers a discount that is close to the interchange fee percentage.

  • For example, if the interchange fee is 2%, merchants can offer a 2% cash discount. This discount comes out of the merchant's costs.

  • Cash and check sales won't have a processing fee. So merchants retain more revenue and increase incentive to bring in more cash sales.

The Step-by-Step Process

  1. Merchants need to partner with a cash discount processing provider. The provider sets up the necessary accounts and supplies POS systems and equipment designed specifically for cash discount programs.

  2. The provider configures the POS systems to apply the cash discount automatically when customers pay with cash or check.

  3. Merchants display signage at the checkout and point of sale informing customers of the cash discount offer. This is required by card network rules.

    1. Check out our State Regulations Page for a full list of rules and regulations

  4. When a credit card is swiped at checkout, the standard price is charged. For cash/check customers, the POS applies the discount and charges the lower price.

  5. The merchant receipt shows two transaction amounts - the standard price and the discounted price. Only the discounted amount is deposited into the merchant's account for cash/check sales.

  6. By incentivizing cash payments, merchants reduce their credit card processing fees and retain more revenue.

For a full walk through of Cash Discount, check out our recent article:


Man on laptop pointing to the sky. A hand with Cash. and a business man with both arms up in celebration.

The Benefits of Cash Discount Processing

There are many potential benefits to implementing cash discount processing:

  • Merchants can reduce their credit card processing costs, which are typically 1.5% to 3% per transaction. Less fees mean increased revenue.

  • More customers paying with cash/check means fewer paid credit card transactions.

    • This directly lowers processing expenses for merchants.

  • There is no need to purchase new or additional POS systems or equipment. Cash discounts can be applied using existing terminals.

    • The Xsellarate Model gives merchants access to new equipment for free upon signing. Check out a list of our most popular equipment choices here:


  • Cash discount programs incentivize customer loyalty by offering discounts. Customers feel like they are getting a better deal with cash payments.

  • Merchants have a powerful marketing tool by advertising cash discounts to customers. This can attract new business.

  • It's a simple, seamless process for customers at checkout. Cash discounts are applied automatically at the point of sale.

  • Cash discount processing has grown in popularity due to its effectiveness at lowering processing costs for merchants of all sizes and types.

Getting Started With Cash Discounts

  • Reach out to credit card processing companies to find a provider that offers cash discount services, or use the web to find companies that offer cash discount programs.

  • The provider will guide merchants through all the necessary setup steps, including configuring POS systems.

  • Be sure merchant account statements clearly separate standard credit transactions from discounted cash transactions.

  • Train staff on processing transactions with the cash discount enabled. Have them educate customers.

    • For additional resource on training your staff for Cash Discount Operations:

  • Prominently display cash discount signs at registers and the point of sale. Signage is key for awareness.

  • Consider advertising cash discounts on websites, social media, and other platforms to inform customers and attract business.




calculator and coins on a golden scale with equal weight. Colorful question marks in the upper right and left hand corner.

Cash Discount Programs vs. Surcharging

Some merchants get cash discount processing confused with credit card surcharging. But these two models are distinctly different:

  • Surcharging charges an extra fee to customers who pay with a credit card. The fee is added on top of the standard price.

  • Cash discounts take a discount off the standard price for cash/check customers. The standard price is charged for credit.

  • Surcharging fees go directly to the merchant. Cash discount savings go to the customer.

  • Many states prohibit credit card surcharges, while cash discounts are permissible nationwide.

  • Customers see surcharges negatively as an added cost. Discounts are seen as savings.

  • Cash discounts incentivize cash payments and loyalty. Surcharges discourage card use.

FAQ about Cash Discounts

How much of a discount can merchants offer for cash payments?

The maximum cash discount under card network rules is 4%, but 1-3% is most common. The allowable amount varies between networks. Providers establish discount rates in compliance with network regulations.

Do merchants need to notify the card networks before implementing cash discounts?

Can cash discounts be offered on debit card purchases?

How do customers react to cash discount programs?

Is special POS hardware required to process cash discounts?


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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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