As a business owner, you are always looking for ways to maximize your profits and reduce expenses. Two popular methods of achieving this goal are cash discount merchant services and surcharging. Both techniques can help you save money on credit card processing fees, but they work in different ways. In this article, we’ll explain the differences between these two methods and help you decide which one is right for your business.

What are Cash Discount Merchant Services?

Cash discount merchant services are a way to offset the cost of credit card processing fees by offering a discount to customers who pay with cash. Instead of charging customers a fee for using a credit card, you offer them a discount if they pay with cash. This way, you still get paid the full amount of the sale, but you don’t have to pay the credit card processing fees.

How does it work?

Here’s an example: Let’s say you run a coffee shop and a customer wants to buy a $5 latte. If they pay with cash, you give them a 3% discount, so they only pay $4.85. If they pay with a credit card, they pay the full $5. However, you pay a 3% processing fee on that sale to your credit card processor.

Benefits of Cash Discount Merchant Services:

• You can offset credit card processing fees.
• Encourage customers to pay with cash, which can be faster and more convenient for them and you.
• No need to worry about complicated surcharging laws.

What is Surcharging?

Surcharging is the opposite of cash discount merchant services. Instead of offering a discount for paying with cash, you charge customers a fee for using a credit card. This fee is usually a percentage of the sale, and it covers the cost of credit card processing fees. The surcharge is added to the total amount of the sale, and customers can choose to pay with cash to avoid the fee.

How does it work?

Using the same coffee shop example as above, let’s say you charge customers a 3% surcharge for using a credit card. If a customer pays with cash, they pay the full $5. If they pay with a credit card, they pay $5.15 ($5 + 3% surcharge). You still get paid the full $5 for the sale, but you use the surcharge to cover the credit card processing fees.

Benefits of Surcharging:

• You can offset credit card processing fees.
• Encourage customers to pay with cash, which can be faster and more convenient for them and you.

Differences between Cash Discount and Surcharging:

• Cash discount offers a discount for paying with cash, while surcharging charges a fee for using a credit card.
• Cash discount is legal in all states, while surcharging is only legal in some states.
• Cash discount does not require any special disclosures, while surcharging requires specific disclosures and compliance with state and federal laws.

Which is Right for Your Business?

Both cash discount merchant services and surcharging can help you save money on credit card processing fees, but which one is right for your business? It depends on several factors, including your location, customer base, and business goals.

If you want to offer an incentive for customers to pay with cash without worrying about compliance with surcharging laws, cash discount may be the way to go. On the other hand, if you want to ensure you are fully offsetting the cost of credit card processing fees and are willing to comply with surcharging laws, surcharging may be a better fit. Ultimately, the choice is up to you and your business needs.