FAQ

Why would I implement the cash discount program?

By eliminating virtually all monthly fees, the cash discount program helps those businesses most impacted by higher processing fees. Small ticket merchants such as a deli or coffee shop may have an average transaction size of only $5-8 dollars. The underlying Interchange cost on a debit card used as a credit card is .05% plus $.22 per transaction before any processor fees are added. If you accept a debit card on a $5 transaction, your effective rate (fees divided by the sale amount) will be $.2225 divided by $5 or 4.45% before processing fees are added. Compare that to a business with a $100 dollar average transaction where total costs are $.27 creating an effective rate that is only 0.027%. The same credit card was used for each transaction, however, the overall impact to profit is noticeably different. The cash discount program could be the difference between profitable and just squeaking by.

Is the cash discount program suitable for all businesses?

The cash discount program is ideal for businesses with low-ticket transactions as you are passing the merchant fees onto the customer.

Is it legal to offer cash discount?

Mitchell Katz, spokesman for the Federal Trade Commission, said in May of 2011: The Dodd-Frank law prohibits a payment card network such as Visa “from inhibiting the ability of anyone to provide a discount for payment by cash, checks, debit cards, or credit cards,” said Katz. “Neither surcharging nor a cash discount is illegal.”

Is this a new program?

Cash discount is not a new program, in fact, it’s been around for decades in Europe and is used across the US at gas stations where cash discounts are offered at the pump. Many national, state and local governments including the DMV, Secretary of State, Post Offices, Schools, Courts, and the IRS implement a Service Fee.

Will a cash discount program eliminate all my monthly card processing fees?

For the most part, yes. Many merchants may have some small fees on their bill - it's difficult to zero out all transaction costs due to billing variations in the Interchange billing structure. In most cases, merchants paying hundreds or even thousands of dollars per month typically see their monthly processing fees drop below $100 per month!

How do I make sure the program is set up correctly for my business?

In order to correctly implement the cash discount program, you need only post approved signage (provided) that states that all transactions now carry a service charge.

Any customer paying with cash will have this fee waived, all posted prices are cash prices. Consumers paying with a card will see a service fee listed on their receipt. The service charge is programmed into your terminal, there are no additional steps to you.

Is it illegal to charge a fee to use a credit card?

Until recently, Visa/MasterCard regulations stated merchants could not charge more to consumers who used a credit card versus other methods of payment. As a result of a 2013 lawsuit, merchants are now allowed to impose a surcharge in all but 10 states and Puerto Rico.

While this may seem like semantics, It’s simply adhering to the wording of Visa/Mastercard regulations that allow the cash discount program to be implemented.

Here’s the verbiage specific to both Visa and Mastercard Rules and Regulations:

From Mastercard Rules 15 November 2016

11.2 Charges to Cardholders

A Merchant must not directly or indirectly require any Cardholder to pay a surcharge or any part of any Merchant discount or any contemporaneous finance charge in connection with a Transaction.

A Merchant may provide a discount to its customers for cash payments.

A Merchant is permitted to charge a fee (such as a bona fide commission, postage, expedited service or convenience fees, and the like) if the fee is imposed on all like transactions regardless of the form of payment used, or as the Corporation has expressly permitted in writing.

From Visa Core Rules and Visa Product and Service Rules – 22 April 2017

5.4.14 Discount Offer – US Region and US Territories In the US Region and a US Territory, a Merchant may request or encourage a Cardholder to use a means of payment other than a Visa

Card or a Visa Card of a different product type (e.g., Visa Classic Card, Visa Traditional Rewards Card, Visa Signature Card) than the Visa Card the consumer initially presents. Except where prohibited by applicable laws or regulations, the Merchant may do so by methods that include, but are not limited to:

Offering the consumer an immediate discount from the Merchant’s list, stated, or standard price, a rebate, a free or discounted product or service, or any other incentive or benefit if the consumer, who initially presents a Visa Card, uses instead another general purpose payment card or another means of payment.

Communicating to consumers the reasonably estimated or actual costs incurred by the Merchant when a consumer uses a particular general purpose payment card or means of payment or the relative costs of using different general purpose payment cards or means of payment
Remember, your stated price now carries a 4% Service Fee, so when you someone pays with cash, they are receiving a discount off of your stated price, not an increase when they pay with credit or other means of payment.

Is this the same as a surcharge? Is it only allowed in certain states?

While similar, the cash discount program is very different in the eyes of Visa/MasterCard.

A surcharge carries with it several stipulations:

Only credit cards may be surcharged – not debit cards
Signage must be posted for a minimum of 30 days prior to implementing a surcharge
4% is the maximum that can be imposed
Surcharging is only allowed in states where the program has not been excluded
With the cash discount program, these limitations are not in place as you are not implementing an additional fee for accepting a credit card, you are providing a discount for those who pay with cash.

In a cash discount program, all prices in a store carry a service charge, all posted prices are the cash price. Those who pay with cash do not have to pay the fee.

Is this a semantics argument? We’ll let you decide, however, Visa/Mastercard and the courts allow for this distinction.

Why don’t I just implement the program myself?

When a fee is incorrectly applied to a transaction, any additional charges to the customer is labeled as a surcharge and is expressly forbidden by Visa, Mastercard, and the processing provider without the proper procedures.

The way around this process is to allow us to automate a Cash Discount Program for you which is different than the Surcharge. In the Cash Discount Program you post signage stating that all consumers will now be paying a 4% Service Fee, however for those paying with cash, the fee will be waived. We automate your equipment so that the fee is automatically added for those customers using any method of payment other than cash (essentially credit cards). While this may sound very similar to the Surcharge Program, it is distinctly different in that everyone is paying an increased fee, but those who pay with cash receive a discount, whereas with the Surcharge program, you are specifically stating that those paying with credit cards will pay more. Most importantly it is aligned with the rules of Visa and Mastercard.

Additionally, you are forbidden by Visa, Mastercard, and the Processor’s rules to profit on a credit card transaction, which could happen if you accidentally charged more than you were being charged by the processor. By utilizing the Cash Discount program, we establish proper pricing for you to ensure you stay within all stated guidelines.

Won’t my customers be upset by this fee and want to go elsewhere?

accept credit cards. By charging a 4% fee on a sales transaction, that’s a small price for customers to pay for the goods and services you provide. And if charging that fee allows you to stay in business and keep your overall costs lower, it’s a small price to pay.

Recent surveys have shown that over 80% of respondents stated they wouldn’t think twice about paying that amount (only $1.00 on a $25.00 transaction) for the benefit of paying by card rather than cash. And we all know that fewer and fewer of us are carrying cash these days…and everyone loves the rewards associated with their credit cards.

Additionally, we’ve all become accustomed to paying $2-4 when we use an ATM, and this cash discount fee is actually cheaper than the ATM fee for most transactions.

If you explain that the Cash Discount program is a way for you to keep providing quality goods and services without increasing your overall prices, most consumers have indicated they understand and are fine with it. And again, a 4% fee on an individual transaction generally has a very small impact to the consumer, but for you, the merchant, your savings are significant.

What if I don’t like the Cash Discount Program after a few days, weeks, or months?

If you want to stop using the Cash Discount Program, we will immediately change you back to our traditional Interchange Pricing. You'll still save lots on fees by utilizing our low rate program, a program which has already saved business owners thousands in fees.

Why offer the cash discount program?

NB POS Solutions is an advocate for our merchants working towards their best interests and a better bottom line! The cash discount program is a way for clients to save more money each month. The program gives multiple options for clients to choose from – the one that will best suit their business.

What if I currently lease a terminal?

Leases are generally an expensive option compared to the actual cost of the equipment. While that payment may seem unnecessary, saving $100 - $500 plus per month makes it much more understandable and easier to contend with.

What if I am under contract?

This answer is similar to the above question, cancellation fees may expensive. Often times, you can wait for a 30 day period after switching seeing any fees. At that point, you will have already noticed a significant amount of savings on a monthly basis making the small, one-time cancellation fee seem insignificant. Ultimately, your bottom line will be better off moving forward.

What if Visa/Mastercard regulations change in the future?

Part of our program at NB POS Solutions is to make sure that we are acting in the best interest of all our clients. What this means to our clients is that we will make sure that all Visa/Mastercard guidelines are being followed to make sure you are compliant. All of our programs allow change within the agreement at any time in order to maintain our good standing with Visa/Mastercard based on changes in regulations. In the case of cash discount, there is no indication that it will change or end anytime soon as it has been around and working successfully for a number of years now.

Where can I learn more?

For more information on cash discount, surcharging, and Visa/Mastercard regulations, we have included a link below. Note: These websites are independent of NB POS Solutions and we are not responsible for their accuracy or completeness. Ideally, we would like to discuss these programs with you, a simple 5-10 minute call will allow us the opportunity to answer all your questions.

https://usa.visa.com/dam/VCOM/download/about-visa/visa-rules-public.pdf