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James Shepherd, CEO of CCSales Pro, a training and
consulting firm based in Altoona, Pa., said he, too, has
received a lot of inquiries about these programs but added
that he counsels against surcharging. Cash discounting is The skinny on surcharging
a simpler option to sell because it's legal nationwide, can be
applied to all card payments and doesn't' carry the negative
connotations of a surcharge. "Merchants are demanding Surcharges are additional fees businesses assess customers who
change, and ISOs and processors are responding with pay by credit card. For decades, Visa and Mastercard banned the
these [cash discount] programs," Shepherd added. practice of merchant surcharging, but they relented under terms
It's a discount, not a surcharge of the 2011 settlement of a lawsuit in which millions of merchants
challenged interchange pricing. The card companies also impose
Cash discounting on its face can seem like surcharging.
"It's sort of the flip side of the coin," Targan said. But, she several requirements on surcharging, including detailed disclosures
was quick to add, there are distinct differences. Chief and limits on assessments.
among these are laws in 10 states prohibiting businesses
from surcharging one particular method of payment, like While Visa and Mastercard make accommodations for surcharging
credit cards (see accompanying sidebar for details).
credit card payments, 10 states have outlawed the practice:
Rules enforced by Mastercard and Visa create other California, Colorado, Connecticut, Florida, Kansas, Maine,
differences. The bankcard brands have strict rules against Massachusetts, New York, Oklahoma and Texas. Several of those
surcharging debit card payments, for example. Plus they state laws, including statutes in California and New York, have
require merchants to register with them (through their been successfully challenged in federal courts. In both of those
acquirer) 30 days in advance of the start of a surcharge
program. Visa and Mastercard also impose program cases, which are now going through the appeals process, the courts
requirements, such as specific customer disclosures, and determined that the bans restrict free speech that is not misleading.
capping surcharges at 4 percent of the ticket or actual
merchant fee, whichever is less. "We expect all state laws [that ban surcharging] will be struck down

on free speech grounds," payments attorney Holli Targan said during
With cash discounting programs, there are no limits on
how much a business marks up its prices and discounts a panel discussion at a Midwest Acquirers Association
for cash, and merchants have no obligation to notify the event in July 2018.
card brands of their plans.
"When cash discounting is done correctly, the processor
collects a service fee [which effectively comes out of the
price increase] and uses that to cover all interchange and Miller said working with a technology provider that
markup," Shepherd said.
specializes in supporting cash discount programs is
There are disclosure requirements associated with cash important for ISOs and MLSs. "There are companies out
discounting: merchants must post signs at entrances to their there that have done all the background work and that
have the systems in place" to assure the programs don't
establishments and at their checkouts notifying customers
that prices reflect costs to card-paying customers and that run afoul of federal, state and card brand rules, she said.
discounts are available for cash-paying customers. The Good fit for some verticals, better income streams
markup/discount also gets printed on customer receipts.
Unlike surcharging, however, no card brand rules dictate Cash discounting has significant appeal, especially among
the wording and font sizes used for printed disclosures, smaller merchants "There is definitely a market for this.
Targan noted. But it's not for everybody," said Dee Karawadra, president
of Impact PaySystem LLC, a Cordova, Tenn.-based ISO.
Employees also need to be trained in explaining to
customers that they can take discounts if paying with cash. For ISOs and MLSs, "It's really just a matter of identifying
"There's a whole educational process on the back end," [business] niches that might want this kind of service,"
said Matt Nern, vice president for sales and marketing at Miller said.
SignaPay. A merchant services provider headquartered in
Irving, Texas, SignaPay introduced PayLo POS in 2017 to Experts interviewed for this article cited several merchant
support cash discount programs. When an ISO or MLS types for which cash discounting holds appeal. These
partner signs a merchant for PayLo, SignaPay works with include businesses with predominantly small-dollar
the merchant to ensure the business and its employees tickets (think nail salons, dry cleaners, coffee shops, and
understand how the program works, Nern said. The firm takeout/delivery services), as well as some specializing in
even provides employee training videos. higher-ticket items (for example, automobile repair shops,
plumbers, veterinarians and daycare centers).

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