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Xsellarate Blog


Jon Millikan

Expert Analyst & Contributor

What is Cash Discount Processing?

Updated: Sep 29, 2023

Cash Discount at a Bakery

Cash discount processing is a smart payment solution that allows merchants to incentivize customers to pay with cash or debit instead of credit cards. With traditional credit card processing, merchants pay a percentage fee known as a "merchant discount fee" to the credit card companies every time a credit card transaction is processed. These fees can really add up, especially for small businesses with tight profit margins. Cash discount programs provide an effective way for merchants to reduce these expensive processing costs.

How Does Cash Discount Processing Work?

With a cash discount program, merchants offer a discount to customers who pay with cash, check, or debit card. This discount essentially passes on some of the merchant's credit card processing savings to the customer.

For example, a merchant may implement a cash discount program with a 3% discount for cash/debit payments. If an item costs $100, a customer paying with credit would pay the full $100. But a customer paying with cash or debit would only pay $97 due to the 3% discount.

The key is that the cash price becomes the standard base price. Signage clearly advertises the new standard cash price. The credit card price is then considered a 3% "surcharge" or "convenience fee" added on top of the new cash price. This allows the program to stay compliant with major credit card processing rules.

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The Benefits of Cash Discount Programs

There are a number of excellent benefits of cash discount processing for merchants:

1. Lower Processing Costs

The main benefit is reduced credit card processing fees. By incentivizing more cash/debit payments, merchants pay less in credit card processing costs. For businesses with tight margins, these savings can have a big impact on profitability.

2. Pass on Savings to Customers

The cash discount enables merchants to share some of the credit card fee savings with customers. This provides a "win-win" that benefits both parties. Customers get a discount for choosing cash/debit, while merchants reduce expenses.

3. Attract More Customers

Many customers are drawn to stores that offer discounts or rewards programs. A cash discount can help drive more foot traffic and increase customer loyalty. The program essentially functions as a modest rewards program for selecting cash/debit.

4. Improve Cash Flow

More cash/debit sales mean faster access to funds. With credit cards, merchants usually don't receive the funds for a couple days. But with cash or debit payments, funds are instantly available. This can help improve cash flow for businesses.

5. Reduce Credit Card Fraud

Cash and debit card payments come with much lower risks of fraud or chargebacks compared to credit cards. Bringing in more cash and debit transactions translates to lower fraud costs.

Is a Cash Discount Program Right for My Business?

Cash discount programs tend to work best for certain types of merchants in particular industries. The best candidates include:

  • Retail stores - Any business with a physical location and a lot of credit card transactions will benefit the most from a cash discount program. This includes retail shops, restaurants, convenience stores, liquor stores, gas stations, salons, auto shops, etc.

  • Service businesses - Landscapers, contractors, general services, house cleaning services and more can also benefit from cash discounts.

  • Healthcare services - Many doctor's offices, dentists, chiropractors and other healthcare providers offer cash discounts on services.

  • Non-profits - Charities, churches and non-profits can offset expensive card processing fees with cash discounts.

Essentially any business with tight margins that processes a high volume of smaller credit card transactions is an excellent candidate for a cash discount program. Businesses with average transaction sizes over $500 may benefit less since the percentage-based processing fees are smaller on large transactions.

Explore the Xsellarate Package Offering:

Setting up a Compliant Cash Discount Program

When setting up a cash discount program, it is extremely important that it adheres to card network rules and regulations. The major card brands have specific requirements that must be followed to avoid non-compliance fees.

Pricing Structure

The cash price must be established as the standard base price readily available to all customers. This is the key factor that makes these programs compliant. Credit card surcharges on top of the cash price must be applied evenly across all card brands accepted.

Proper Disclosure

Merchants must clearly disclose their pricing to customers at the point of sale and the entrance of the business. Signage should highlight that discounts are offered for cash/debit payments. All advertised pricing should lead with the cash price.

Customer Receipts

Receipts must show the cash price and then display any credit card surcharge separately. Customers should see the math breakdown of the discount or surcharge on every receipt.

No Minimums or Maximums

Cash discounts must be offered consistently on all transactions of any size. Discounts cannot be limited to payments above or below certain amounts. All customers must have equal access to the cash discount on every purchase.

Honoring Published Prices

If any advertised pricing mentions only a single price, merchants must honor that price for credit card customers. Published ad pricing must be available to all customers regardless of payment type, unless otherwise disclaimed at the time of check out.

With the right point-of-sale system and payment processor, implementing a compliant and effective cash discount program is straightforward. The experts at Xsellarate offer customizable cash discount programs tailored to your unique business needs. Their solution combines compliant cash discount software with seamless POS integrations and transparent pricing.

Below are some easy steps and procedural elements to remember when setting up your Cash Discount Business:



1. Check for Federal & State Requirements

Every zero-cost credit card processing strategy is subject to federal and state regulations. Ensure transparency, proper disclosure, and non-discriminatory business practices.

2. Apply for a State Cash Discount Program License (if needed)

Some states may require additional steps before merchants can run a compliant cash discount program.

3. Reach Out to Your Payments Provider

Most merchant account and payment processing service providers can support a cash discount program. Work with your current processor to reprogram the system and gather necessary information.

4. Post Correct Signage

​Correct signage must be posted at the door and checkout. The posted prices are considered cash prices, and the signage allows for a fee if the payment is not made with cash.

5. Display Service Fee on Receipt

The amount of the added service fee must be clearly displayed on the receipt.

6. Offer Cash Discount Verbally

​Offer your customers a cash discount verbally at checkout.

7. Use Compliant Technology

Ensure that the technology you use is compliant and displays the required line items on the receipt.

8. Stay Updated with Regulations

Stay updated with federal and state regulations to ensure ongoing compliance.


Cash Discount POS Integrations

To run a smooth cash discount program, the point-of-sale system must integrate properly with the payment processing solution. The POS system needs to be able to easily process transactions at the cash price or credit price based on the payment type selected.

Xsellarate offers seamless POS integrations including:

The Xsellarate platform offers simple cash discount apps for mainstream POS systems like Clover, Square, Vend, etc. Their app store continues to expand support for new platforms as well.

Cash Discount Pricing & Rates

One confusing aspect of evaluating cash discount programs is deciphering the pricing models. Providers use varying pricing structures that determine the total processing costs.

There are a few key pricing factors to understand:

  • Interchange rates - The underlying card network rates paid on credit transactions. Varies by card type.

  • Transaction fees - Added fees per transaction in addition to interchange, usually $0.05 - $0.10.

  • Markup % - The % markup the provider adds on top of interchange. Usually 0.5 - 2%.

  • Monthly fees - Account charges like monthly minimums, statement fees, PCI fees, etc.

  • Cash discount % - The % discount offered for cash/debit payments. Often 2-3%.

When comparing providers, it helps to calculate the effective rate you would pay across your card mix. Take into account all the above pricing factors to determine the true total processing costs.

Xsellarate stands out by offering a simple pricing model with no inflated markups. Their “Pass-Through Pricing” strategy passes along wholesale interchange costs with no markup % added. Low monthly fees and competitive cash discount rates result in substantial savings for merchants.

Different POS provider logos such as: Paypal, Clover, square, skytab, zettle, shopifypos, and aloha, with a cartoon coffee stand in the background

Top Cash Discount POS Systems

If you currently lack a point-of-sale system, you’ll want to select one that integrates smoothly with cash discount processing. Here are some top options:

Clover POS

Clover offers versatile POS hardware stations and integrates nicely with Xsellarate’s cash discount software. Clover’s customizable apps enable detailed sales reporting and inventory management.

Vend POS

Vend focuses on retail and ecommerce businesses. It’s intuitive interface works well for employee training. Xsellarate provides direct cash discount integration with Vend POS included.

Shopify POS

Shopify offers robust omni-channel capabilities alongside its iPad based POS system. It syncs seamlessly with the Shopify ecommerce platform. Shopify POS integrates with the Xsellarate cash discount program.

Square POS

The popular Square system works great for restaurants, retail shops and service businesses. Square’s simple pricing and powerful software make it a go-to choice for many merchants.

PayPal Zettle POS

PayPal Zettle combines payment processing, point-of-sale capabilities and business financing. Zettle offers flexible month-to-month contracts. Xsellarate can enable cash discounts on Zettle POS.

List of Top Cash Discount Merchant Services Companies For You And Your Business:

Many merchant providers now offer comprehensive cash discount programs. Here is a short list of some of the most popular options with pricing and features:


Best For

Fee Structure

More Info


​Merchants seeking cash discount + web development + marketing help

​Variable monthly account fee ranging from $99 - $1,000, depending on services required. Transparent single monthly fee structure

National Processing

Cost-conscious merchants

$9.95+/month account fee and $0-$30/month for the cash discounting program


High-risk businesses

Variable monthly account fee and variable cash discounting program fee

Host Merchant Services

Medium-sized retail & eCommerce businesses

$14.99/month account fee and $0-$19.99/month cash discounting program fee


Merchants using Clover processing hardware

$15/month account fee (traditional processing; N/A for cash discounting) and $25-$100/month cash discounting program fee

Shift Processing

CBD & other high-risk merchants

Variable monthly account fee and variable cash discounting program fees

KIS Payments

​Canadian merchants

Variable monthly fees for standard (non-cash discounting) account and $65/month cash discounting program fee (+ 39.95/additional terminal)


Is a Cash Discount Right for My Business?

While cash discounts provide substantial benefits, they are not right for every business. Certain types of merchants may not benefit as much from cash discounts or have issues with implementation.

High Ticket Merchants

If your average transaction size is over $500, cash discounts provide fewer benefits since card processing fees are a smaller percentage of large transactions. However, gas stations with higher price points still benefit greatly from cash discounts on fuel pumps.

Digital Goods

Selling online courses, software subscriptions, digital media or other virtual products? In these cases cash discounts don’t apply since there are no in-person payments.

B2B Invoicing

For accounts receivable workflows where customers are billed and pay invoices later, cash discounts integrated at the point of sale will not help. However, early payment discounts can incentivize faster B2B collections.

Required to Accept Cards

Some merchants in certain industries are required to accept credit cards and cannot offer discounts for cash or debit payments. Examples include government entities, schools, hospitals, etc.

Be sure to evaluate whether a cash discount or credit card surcharge aligns with your business model and customer base. Reach out to our payments experts at Xsellarate to discuss the best payment solutions for your needs.


FAQ's: Cash Discount Processing

What is cash discount processing?

Cash discount processing allows merchants to offer a discount to customers who pay with cash, check, or debit card. This incentivizes customers to use lower cost payment types to help merchants reduce their credit card processing fees.

How does a cash discount program work?

What are the benefits of a cash discount program?

What types of businesses benefit most from cash discounts?

How do I set up a compliant cash discount program?

What POS systems support cash discount processing?

How does cash discount pricing work?

Is a cash discount right for my business?

How do I learn more or get started?

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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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