What is the Difference between a Surcharge and a Cash Discount?

Understanding the difference between a surcharge and a cash discount is essential for optimizing your payment processing strategy. While both models help offset processing costs, they function differently at the point of sale:

• Surcharge Model: This adds a specific percentage-based fee (typically around 3%) at the time of checkout for customers who choose to pay with a credit card. It is an additional charge on top of the posted price. Under federal law, surcharges cannot be applied to debit card transactions, and they face strict state-level and card-brand regulations.
• Cash Discount Model: We often implement this through a dual pricing model, where your business posts a non-cash price and offers a discount to customers who pay with cash. Unlike a surcharge, nothing is added after the initial price is quoted; instead, cash payers are rewarded with a lower rate.

We recommend the cash discount program for many of our merchants because it is generally permitted in all 50 states and is often viewed more positively by customers as a reward rather than a penalty.

As your partner for better payment processing, we offer solutions like free Clover placements to help you automate these calculations. We provide competitive, wholesale-style rates with no setup fee and no cancellation fee.

Merchant must qualify for free or discounted hardware.

• Surcharge vs Cash Discount: Complete Guide for Merchants