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Jon Millikan

Expert Analyst & Contributor

Ultimate Guide: Cash Discount Processing Explained

Updated: Sep 22, 2023

Credit Card Processing & Cash Discount

Cash discount processing is becoming an increasingly popular payment processing method for businesses of all sizes. With cash discounting, merchants can reduce their credit card processing fees by incentivizing customers to pay with cash or check instead of credit cards. This comprehensive guide will explain everything you need to know about cash discount processing.

Definitions For Cash Discount Processing?

Cash discount processing allows merchants to offer a discount to customers who pay with cash, check, or ACH payments. This discount typically ranges from 1-4% of the total transaction amount. The discount incentivizes customers to use these lower cost payment methods rather than credit cards.

For the merchant, cash discounting shifts some of the credit card processing fees to the customer. Merchants pay around 2-4% in credit card processing fees on each transaction. With cash discounting, a portion of these fees are passed onto credit card customers in the form of "surcharges". Cash and check customers get a discount equivalent to the surcharge amount.

Harbortouch POS Software - Cash Discount Program

How Does Cash Discount Processing Function?

There are two main steps to implementing cash discount processing:

1. Set up Cash Discount Rates

First, the merchant needs to determine their cash discount rates. This involves calculating the average credit card processing fees paid across all card types like Visa, Mastercard, Discover, AMEX, etc. Typically the cash discount rate is set slightly lower than the average credit card processing rate.

For example, if a merchant pays the following processing rates:

  • Visa: 2.5%

  • Mastercard: 2.5%

  • Discover: 2.5%

  • AMEX: 3.0%

The average processing rate is 2.625%. So the merchant may set their cash discount rate at 2.5%.

Configure the POS system

2. Configure the POS System

Next, the POS system needs to be configured to handle cash discount processing. There will be separate payment buttons for "Credit Card" and "Cash Discount".

When a customer pays with a credit card, they are charged the regular listed price with no discounts or surcharges.

But when a customer chooses the "Cash Discount" button, the POS system will automatically deduct the pre-set cash discount percentage from the total transaction amount.

So if the cash discount rate is 2.5%, a $100 transaction would be discounted down to $97.50 for cash/check customers.

The Plus Side Of Cash Discounting

There are many potential benefits to implementing cash discount processing:

  • Lower processing costs - By incentivizing cash payments, merchants pay fewer credit card processing fees. Over time this leads to significant savings.

  • Pass costs to customers - Cash discounting allows merchants to shift a portion of card processing costs to credit card users.

  • Save customers money - Customers who pay with cash or check can enjoy discounts of 1-4% on each transaction. This provides a monetary incentive for customers to use lower cost payment types.

  • Increase sales - The discounts offered for non-credit card payments can encourage customers to buy more goods and services.

  • Attract new customers - Cash discounts can be advertised to attract new customers looking for deals.

  • Remain competitive - As cash discounts become more common, merchants may need to implement them to remain competitive.

  • Compliant - Cash discounting when implemented properly is compliant with card network regulations.

Is Cash Discounting Legal? - Is It Legal Everywhere?

Cash discounting is legal in the United States and Canada when implemented correctly. There are a few key requirements:

  • The cash price must be the posted price visible to customers.

  • The cash discount must be clearly disclosed to customers before transactions are completed.

  • Customers should see the regular price as well as any discounts or surcharges that will be applied.

  • Cash discounts must be offered strictly as an incentive for a particular payment type. Merchants cannot impose mandatory fees or surcharges on credit card transactions.

As long as these requirements are met, cash discounting is permitted under the card network and payment processing rules. Merchants found violating these standards could potentially face fines, higher fees, or termination of their payment processing services.

It is highly recommended that merchants consult closely with their payment processor before implementing cash discounts. The processor can ensure proper compliance and provide any documentation or signage required.

Cash Discount - What Your Business Will Need

Here are some key requirements for legally implementing cash discount programs:

  • Post visible signage - Clear signage must be posted at the point of sale and on printed materials informing customers of the cash discount pricing. Signage should show the regular price as well as the discounted cash price.

  • Disclose terms upfront - Any surcharges or discounts must be clearly disclosed to the customer before the transaction is completed. This allows them to select their preferred payment method.

  • Refund original tender - If a credit card customer requests a refund, it must be issued at the original credit card price with no discounts or surcharges applied.

  • No minimums/maximums - Discounts and surcharges must be implemented as fixed percentages. There cannot be minimums, maximums or tiered pricing structures.

  • Follow card network rules - Visa, Mastercard, Discover and AMEX have detailed rules around cash discounts that must be followed. Close coordination with your processor is crucial.

Cash Discount Programs - Things To Remember

Here are some best practices merchants should follow when implementing cash discount programs:

  • Consult closely with your payment processor and follow all guidelines.

  • Train staff on properly processing cash discount transactions.

  • Post clear exterior and interior signage at all entrances and points of sale.

  • Disclose terms on all printed materials like menus, invoices, online checkout pages, etc.

  • Set discounted cash prices equivalent to the average credit card processing costs.

  • Remain compliant with card network rules by avoiding credit card surcharges.

  • Refund customers via original payment method and price paid if requested.

  • Offer cash discounts consistently across all products, services, and delivery methods.

  • Integrate cash discounting directly into your POS system for seamless transactions.

Cash Discount Processing Examples

Here are industry examples illustrating how cash discount programs work:

Retail Industry

Restaurant Industry

Healthcare Industry

Professional Services

Non-Profit Industry

Contractors & General Contractors


Entertainment & Recreation

Personal Services


Cash Discount vs. Credit Card Surcharge

There is an important difference between a cash discount and credit card surcharge:

  • Cash discounts incentivize non-credit card payment types by offering savings off the regular price. This is compliant.

  • Credit card surcharges charge additional fees only to credit card customers. Surcharges on credit transactions are prohibited by the card networks.

Be sure to avoid surcharges and frame your program properly as a cash discount offering savings to cash/check customers. Consult closely with your processor to ensure proper compliance.

Who Offers Cash Discount Processing?

Many payment processors and merchant services providers now offer cash discount processing programs. When researching providers, look for the following:

  • Seamless integration - Cash discounting should integrate directly with your POS system for streamlined transactions.

  • Compliance expertise - The processor should have extensive knowledge of card network regulations and provide proper documentation.

  • Customer support - Look for dedicated customer service and support for implementing and managing your program.

  • Fair transparent pricing - No hidden fees or inflated rates. Quality providers offer interchange-plus pricing.

  • Reputation - Select an established, reputable processor known for reliability. Check online reviews.

Quality cash discount programs allow merchants to save significantly on card processing costs while remaining compliant. Compare multiple providers carefully to find the best solution for your business.

Popular Companies For Cash Discount

Xsellarate Merchant Services

Zero Cost Processing


Xsellarate offers zero cost processing for small businesses, allowing them to eliminate 100% of processing fees by rewarding cash transactions.

Innovative Platform


The platform allows businesses to accept credit cards with no processing cost to the merchant. Their Merchant Growth Programs enable merchants to pass fees along to their customers, thus eliminating credit card processing fees.

Xsellarate Cash Discount System


This system allows merchants to offset merchant service fees without increasing the sale price.

Traditional Processing


Through partnerships with TSYS and FirstData, Xsellarate offers competitive rates for conventional processing.

Merchant Growth Programs


These programs include merchant processing, web services, and SEO. They serve as a one-stop shop delivering money back to businesses and providing essential web services to help them grow.



The cash discount system is available in all 50 states.

Transaction Process


There's no change in the transaction process, and businesses can collect 100% of their processing sales. They also offer next day funding.

Web Services


Xsellarate's professional web services team handles web design/redesign, social media integration strategy, UI/UX implementation & strategy, web hosting services, and e-commerce integrations.

Professional SEO


Their SEO team focuses on building a strong digital presence for businesses. Services include Google site indexing, monthly in-depth reporting, website content optimization, and more.

Equipment for Advanced POS Needs


Xsellarate offers SkyTab POS and equipment free of charge for merchants on Cash Discount Programs. This allows merchants to use advanced POS systems without incurring credit card processing fees.

Cost Comparison


An example is provided comparing the average cost for a restaurant using Toast Credit Processing vs. Xsellarate Credit Processing + SkyTab. The latter results in zero processing fees.

Cash Discount Processing and Equipment

To fully benefit from cash discounts, merchants need the right point of sale systems and equipment. Look for POS systems with the following features:

  • Separate payment buttons - Buttons for credit, cash discount, check, etc. make it easy to apply discounts.

  • Seamless integration - The POS should integrate directly with your payment processor for smooth transactions.

  • Customizable software - Ability to set cash discount percentages and add custom signage/messaging.

  • Detailed reporting - Review reports on cash vs credit transactions to monitor your program.

  • Receipt messaging - Custom receipts that show discounts/surcharges applied.

  • Chip card readers - Accept EMV chip cards for enhanced security.

  • Contactless - NFC payments allow fast tap-to-pay transactions.

  • Mobile - For businesses on the go, look for Bluetooth-enabled mobile chip card readers.

The right POS system tailored to your needs helps you get the most from a cash discount program. As a Clover POS partner, Xsellarate offers many cash discount optimized hardware bundles and custom software solutions.

Clover POS

Implementing Cash Discounts on Clover POS

The Clover platform provides an ideal POS system for cash discount processing.

With Clover, cash discounts can be implemented in three simple steps:

1. Set Discount Percentages

Customize cash discount rates for each payment type like cash, check, debit, etc. right from the Clover interface.

2. Configure Payment Buttons

Add dedicated cash discount and credit buttons. Clover allows full customization of payment options.

3. Process Transactions

When cash discount is selected, Clover automatically applies the pre-set discount percentage to the transaction total.

Key benefits of managing cash discounts on Clover include:

  • Seamless integration with multiple credit card processors like Xsellarate.

  • Customizable software, buttons, and receipts.

  • Detailed reporting on cash, credit, and discount transactions.

  • EMV security with end-to-end chip card encryption.

  • Omnichannel solutions for in-store, online, and mobile transactions.

With streamlined functionality and robust features optimized for cash discounts, the Clover platform provides a complete point of sale solution.

Cash Discount App for Clover POS

Specialized cash discount apps can further enhance Clover's capabilities for processing discounted transactions.

The Clover Cash Discount app provides many additional features including:

  • Easy discount setup - Quickly establish cash discount percentages per payment type.

  • Retail mode - Apply discounts by transaction or by product type.

  • Customizable branding - Add your logo and colors to receipts.

  • Automatic tax handling - Correct taxes calculated based on discounted totals.

  • Detailed reporting - Advanced analytics on discount usage and effectiveness.

  • Receipt messaging - Add custom notes about your cash discount program.

The Clover Cash Discount app integrates seamlessly with your Clover POS system allowing you to optimize and tailor your cash discount program.

Adopting Cash Discounts for Small Businesses

Cash discount programs offer significant benefits for small businesses looking to reduce credit card processing expenses. Here are tips for small businesses adopting cash discounts:

  • Start small with a 1-2% discount on cash or check payments and increase over time.

  • Train staff thoroughly on cash discount procedures and compliance. Have everyone onboard.

  • Add clear signage and disclose discounts across all customer touchpoints - online, in-store, etc.

  • Set up your POS system and apps properly to apply discounts automatically.

  • Communicate with customers on discounts available for non-credit card payments.

  • Analyze program data regularly to identify issues and optimize discount levels.

  • Keep current on card network rules and work closely with your processor.

With the right POS setup and staff training, small businesses can smoothly transition to a compliant, highly effective cash discount program. Partnering with experts like Xsellarate simplifies and accelerates the process.

Cash Discounts for Specific Industries

Cash discounts can provide cost savings for nearly any business that accepts credit card payments. Here are some examples of how cash discounts are used across different industries:



Seeing high card processing fees upward of 3%, many restaurants are turning to cash discounts to drive down these costs. Popular implementations include:

  • Providing a 3% discount for cash payments on all dine-in orders.

  • Offering a 2% cash discount for take-out orders paid in cash.

  • Applying a 4% discount on cash payments for delivery orders.

With tight margins, cash discounts allow restaurants to significantly reduce credit card fees and boost profitability.

Retail Stores

Retail Stores

Retailers too pay high credit card processing fees, often 2-3% per transaction. Cash discounts help offset these expenses.

  • A small boutique provides a 3% discount on all cash and check purchases.

  • A toy store offers a 2% discount for debit card transactions to incentivize electronic payments over cash.

  • A hardware outlet implements a tiered cash discount program, with a 2% discount for check and a 4% discount for cash.

Properly implemented, these programs allow retailers to shift costs and drive sales with cash discounts.

Service Providers

Service Providers

Whether home contractors, lawyers, accountants or agents, service businesses see cash discounts keeping more money in their pockets.

  • A house cleaning company provides a 2% discount for cash/check payment on services.

  • A landscaping firm offers customers a 3% discount paying their entire season's services in advance via cash or check.

  • A real estate agency promotes a cash payment discount of $500 on their standard commission rates.

These constructive incentives allow service businesses to optimize their payment costs.

The savings and benefits are proving universal across sectors. More industries are adopting cash discounts in diverse ways to suit their business models and needs.

Cash Discount Processing Considerations

While cash discounts provide merchants significant benefits, there are some important factors to consider:

  • Staff training - Employees will need to be trained on properly applying discounts in compliance with card network rules.

  • Upfront costs - Some initial investments may be required for new POS systems, cash discount software, and signage.

  • Customer confusion - The difference between cash discounts and credit card surcharges must be clearly communicated to customers.

  • Accounting changes - Business accounting practices may need adjustment to track discounted sales and processing costs accurately.

  • Tax implications - Tax reporting may change when sale amounts are discounted. Consult your accountant.

  • Security - Merchants will need to implement security measures and best practices for handling increased cash volumes.

As with any substantial business change, thoughtful planning, preparation, and partner selection helps ensure a smooth transition to a successful cash discount program.

Is a Cash Discount A Good Fit For You & Your Business?

Cash discount processing delivers compelling benefits, but is not necessarily the best choice for every business. Consider these key factors when deciding if implementing cash discounts makes sense for your company:

Processing Costs

Do you pay high credit card processing fees of 2% or more? Cash discounts provide larger savings for merchants with higher processing costs.

Customer Payment Habits

Will your customers be willing to pay with cash or check to receive discounts? Assess your audience.

Average Order Value

For high ticket items or services, cash discounts can drive significant per-transaction savings that justify the effort.

Sales Margins

Thin margin businesses stand to benefit more from cash discounts in reducing their processing overhead costs.

Staffing Considerations

Do you have staff resources to take on training and extra cash handling procedures?

Space Limitations

Is there room for the extra signage and point of sale adjustments required?

Existing Hardware

Upgrading older systems may be required to integrate cash discounting.

Carefully weighing these factors helps determine if now is the right time for your business to make the switch to cash discount processing.

Get Started with Cash Discount

As cash discount adoption grows, merchants are reaping the sizable benefits of lower processing fees and increased sales. This definitive guide covers everything you need to know - from pros and cons to compliance requirements.

Fill Out A Free Consultation Form For You And Your Business:

Cash Discount Processing FAQ's

What are the benefits of cash discount processing?

How much should a cash discount be?

Is cash discount processing legal?

What is the difference between a cash discount and credit card surcharge?

What do I need to implement cash discount processing?

How do I set up cash discounts in my POS system?

What are the downsides of cash discounts programs?

How do I get started with cash discount processing?

Can any business use cash discount processing?

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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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