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Does Cash Discounting work in my state?
Can I do Cash Discounting in California?
Yes, please see below.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
California prohibited credit/debit surcharges per Cal. Civil Code §1748.1 but was declared unconstitutional in Italian Colors Restaurant et al. v. Harris, 99 F. Supp.3d 1199 (E.D. Cal. 2015). Surcharging is legal in California.
California revenue statutes specifically allow a properly structured discount program:
Cal. Civil Code §1748
Any provision in a contract between a card issuer and a retailer which has the effect of prohibiting the retailer from offering price discounts or from charging a different and lower price to customers who pay for goods or services by cash instead of by credit card is contrary to public policy and void.
References:
Can I do Cash Discounting in Colorado?
Yes, please see below.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
Colorado specifically bans surcharging per Colo. Rev. Stat. §5-2-212
(1) Except as otherwise provided in §§24-19.5-103 (3) and 29-11.5-103 (3), C.R.S., no seller or lessor in any sales or lease transaction or any company issuing credit or charge cards may impose a surcharge on a holder who elects to use a credit or charge card in lieu of payment by cash, check, or similar means. A surcharge is any additional amount imposed at the time of the sales or lease transaction by the merchant, seller, or lessor that increases the charge to the buyer or lessee for the privilege of using a credit or charge card. For purposes of this section, charge card includes those cards pursuant to which unpaid balances are payable on demand.
Colorado revenue statutes specifically allow a properly structured discount program:
Colo. Rev. Stat. §5-2-212
(2) A discount offered by a seller or lessor for the purpose of inducing payment by cash, check, or other means not involving the use of a seller or lender credit card shall not constitute a finance charge if such discount is offered to all prospective buyers and its availability is disclosed to all prospective buyers clearly and conspicuously in accordance with regulations of the administrator.
References:
Can I do Cash Discounting in Connecticut?
Yes, see below.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
Connecticut specifically bans surcharging per Conn. Rev. Stat. §42-133ff
(a) No seller may impose a surcharge on a buyer who elects to use any method of payment, including, but not limited to, cash, check, credit card or electronic means, in any sales transaction.
(b) Any seller who accepts or offers to accept a bank credit card bearing a trade name as a means of payment shall accept any bank credit card bearing such trade name presented by a cardholder, notwithstanding the identity of the card issuer. For the purposes of this subsection, “bank credit card” means any credit card issued by a bank, savings bank, savings and loan association or credit union.
Connecticut revenue statutes specifically allow a properly structured discount program:
Conn. Gen. Stat. §42-133ff
(c) Nothing in this section shall prohibit any seller from offering a discount to a buyer to induce such buyer to pay by cash, debit card, check or similar means rather than by credit card.
References:
Can I do Cash Discounting in Maine?
Yes, please see below.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
Maine specifically bans surcharging per Me. Rev. Stat. tit. 9-A §8-509 for non-governmental entities:
Me. Rev. Stat. Ann. tit. 9-A, §8-509
1. Surcharge prohibited. A seller in a sales transaction may not impose a surcharge on a cardholder who elects to use a credit card or debit card in lieu of payment by cash, check or similar means. For purposes of this section, “surcharge” means any means of increasing the regular price to a cardholder that is not imposed on a customer paying by cash, check or similar means. A discount or reduction from the regular price is not a surcharge.
Maine revenue statutes specifically allow a properly structured discount program:
Me. Rev. Stat. Ann. tit. 9-A, §8-509
1. Surcharge prohibited. A seller in a sales transaction may not impose a surcharge on a cardholder who elects to use a credit card or debit card in lieu of payment by cash, check or similar means. For purposes of this section, “surcharge” means any means of increasing the regular price to a cardholder that is not imposed on a customer paying by cash, check or similar means. A discount or reduction from the regular price is not a surcharge.
Notes:
The language regarding how a discount is viewed and what qualifies is relatively vague, and it is important to understand that in a state like Maine, it is critical to utilize best practices. For a cash discount program to work in Maine, you must ensure that the following are in place:
- the ability for a customer to view “full-price” or “non-cash” prices prior to the checkout experience (See our QR program).
- a service fee, credit card fee, or other fee is not itemized on the customer receipt
- the customer receipt must disclose that the credit paying customer did not receive a cash discount
References:
Can I do Cash Discounting in Massachusetts?
Yes, please see below.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
Massachusetts specifically bans surcharging per Mass. Gen. Laws Ann. ch. 140D §28A:
Mass. Gen. Laws Ann. ch. 140D, §28A
(a)(2) No seller in any sales transaction may impose a surcharge on a cardholder who elects to use a credit card in lieu of payment by cash, check or similar means.
Massachusetts revenue statutes specifically allow a properly structured discount program:
Mass. Gen. Laws Ann. ch. 140D, §28A
(a)(1) With respect to a credit card which may be used for extensions of credit in sales transactions in which the seller is a person other than the card issuer, the card issuer may not, by contract or otherwise, prohibit any such seller from offering a discount to a cardholder to induce the cardholder to pay cash, check or similar means rather than use a credit card.(b) With respect to any sales transaction, any discount from the regular price offered by the seller for the purpose of inducing payment by cash, check or other means not involving the use of an open-end-credit plan or a credit card shall not constitute a finance charge under section four if such discount is offered to all prospective buyers and its availability is disclosed clearly and conspicuously.
Notes:
The language regarding how a discount is viewed and what qualifies is not specific, and it is important to understand that in a state like Massachusetts, it is critical to utilize best practices. For a cash discount program to work in Massachusetts, you must ensure that the following are in place:
- the ability for a customer to view “full-price” or “non-cash” prices prior to the checkout experience (See our QR program).
- a service fee, credit card fee, or other fee is not itemized on the customer receipt
- program language should not reference a “cash discount” unless the customer receives a bonafide and itemized discount on their receipt
- the customer receipt must disclose that the credit paying customer did not receive a cash discount
References:
Can I do Cash Discounting in New Hampshire?
Yes, please see below.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
New Hampshire has no specific restrictions on surcharging so businesses must follow Federal and card brand guidelines.
New Hampshire has no specific text addressing credit card or other payment type related discounts. For these circumstances, we refer to the Durbin Amendment of the Dodd Frank Act:
(2) LIMITATION ON RESTRICTIONS ON OFFERING DISCOUNTS FOR USE OF A FORM OF PAYMENT.—
(A) IN GENERAL.—A payment card network shall not, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability of any person to provide a discount or in-kind incentive for payment by the use of cash, checks, debit cards, or credit cards to the extent that— (i) in the case of a discount or in kind incentive for payment by the use of debit cards, the discount or in-kind incentive does not differentiate on the basis of the issuer or the payment card network; (ii) in the case of a discount or in-kind incentive for payment by the use of credit cards, the discount or in-kind incentive does not differentiate on the basis of the issuer or the payment card network; and (iii) to the extent required by Federal law and applicable State law, such discount or in-kind incentive is offered to all prospective buyers and disclosed clearly and conspicuously.
(B) LAWFUL DISCOUNTS.—For purposes of this paragraph, the network may not penalize any person for the providing of a discount that is in compliance with Federal law and applicable State law.
References:
Can I do Cash Discounting in North Carolina?
Yes, please see below.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
North Carolina has no specific restrictions on surcharging so businesses must follow Federal and card brand guidelines.
North Carolina has no specific text addressing credit card or other payment type related discounts. For these circumstances, we refer to the Durbin Amendment of the Dodd Frank Act:
(2) LIMITATION ON RESTRICTIONS ON OFFERING DISCOUNTS FOR USE OF A FORM OF PAYMENT.—
(A) IN GENERAL.—A payment card network shall not, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability of any person to provide a discount or in-kind incentive for payment by the use of cash, checks, debit cards, or credit cards to the extent that— (i) in the case of a discount or in kind incentive for payment by the use of debit cards, the discount or in-kind incentive does not differentiate on the basis of the issuer or the payment card network; (ii) in the case of a discount or in-kind incentive for payment by the use of credit cards, the discount or in-kind incentive does not differentiate on the basis of the issuer or the payment card network; and (iii) to the extent required by Federal law and applicable State law, such discount or in-kind incentive is offered to all prospective buyers and disclosed clearly and conspicuously.
(B) LAWFUL DISCOUNTS.—For purposes of this paragraph, the network may not penalize any person for the providing of a discount that is in compliance with Federal law and applicable State law.
References:
Can I do Cash Discounting in South Carolina?
Yes, please see below.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
South Carolina has no specific restrictions on surcharging so businesses must follow Federal and card brand guidelines.
South Carolina has no specific text addressing credit card or other payment type related discounts. For these circumstances, we refer to the Durbin Amendment of the Dodd Frank Act:
(2) LIMITATION ON RESTRICTIONS ON OFFERING DISCOUNTS FOR USE OF A FORM OF PAYMENT.—
(A) IN GENERAL.—A payment card network shall not, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability of any person to provide a discount or in-kind incentive for payment by the use of cash, checks, debit cards, or credit cards to the extent that— (i) in the case of a discount or in kind incentive for payment by the use of debit cards, the discount or in-kind incentive does not differentiate on the basis of the issuer or the payment card network; (ii) in the case of a discount or in-kind incentive for payment by the use of credit cards, the discount or in-kind incentive does not differentiate on the basis of the issuer or the payment card network; and (iii) to the extent required by Federal law and applicable State law, such discount or in-kind incentive is offered to all prospective buyers and disclosed clearly and conspicuously.
(B) LAWFUL DISCOUNTS.—For purposes of this paragraph, the network may not penalize any person for the providing of a discount that is in compliance with Federal law and applicable State law.
References:
Can I do Cash Discounting in Vermont?
Yes, please see below.
The information provided on this website does not, and is not intended to, constitute legal advice; instead, all information, content, and materials available on this site are for general informational purposes only. Information on this website may not constitute the most up-to-date legal or other information.
Vermont has no specific restrictions on surcharging so businesses must follow Federal and card brand guidelines.
Vermont has no specific text addressing credit card or other payment type related discounts. For these circumstances, we refer to the Durbin Amendment of the Dodd Frank Act:
(2) LIMITATION ON RESTRICTIONS ON OFFERING DISCOUNTS FOR USE OF A FORM OF PAYMENT.—
(A) IN GENERAL.—A payment card network shall not, directly or through any agent, processor, or licensed member of the network, by contract, requirement, condition, penalty, or otherwise, inhibit the ability of any person to provide a discount or in-kind incentive for payment by the use of cash, checks, debit cards, or credit cards to the extent that— (i) in the case of a discount or in kind incentive for payment by the use of debit cards, the discount or in-kind incentive does not differentiate on the basis of the issuer or the payment card network; (ii) in the case of a discount or in-kind incentive for payment by the use of credit cards, the discount or in-kind incentive does not differentiate on the basis of the issuer or the payment card network; and (iii) to the extent required by Federal law and applicable State law, such discount or in-kind incentive is offered to all prospective buyers and disclosed clearly and conspicuously.
(B) LAWFUL DISCOUNTS.—For purposes of this paragraph, the network may not penalize any person for the providing of a discount that is in compliance with Federal law and applicable State law.
References:
We’re adding more information all the time. That said, most states don’t have many specifics. Let’s chat about yours and go from there!
Best Practices
- No “fee” itemized on receipt
- Clear posted signage
- No reference to “Cash Discount”
- Disclose $0 discount on credit receipts
Frequently Asked Questions
Simply put, a cash discount program provides a monetary incentive for your customers to pay with cash. You’re offering a discount for the customer to pay with cash, which makes sense because you are avoiding paying a processing fee for credit card payments.
Each processor may have a slightly different version of Cash Discount, with varying degrees of compliance. The two most popular options are:
- Non-Cash Adjustment
This is where every item or service offered by the merchant (that’s you) is subject to a percentage service or other fee. This fee is automatically added to everything in the “customer basket” and if paying cash, the “customer basket” is discounted down to the cash-incentive price. This is what is called an “in-kind” incentive. - Cash Discount
Imagine you offered a 10% discount to active duty military. If someone walks into your establishment and orders $50 worth of goods, you charge them $50, right? But once they present their military ID, you discount the $50 down to $45. Cash discount in its truest form is simply that – offering a discount based on the customer paying with cash. Typically, merchants using this version of cash discount will execute, with our help, menu or service sheet price adjustments and possibly some point of sale edits.
Consider this example: you offer a 10% discount to active duty military at your business. When someone comes in and presents their military ID, you take 10% off their bill. That’s a discount for a specific circumstance. Swap out military for cash, and you have yourself a cash discount. Surcharging would be where you offer a 10% active duty military discount, but instead of discounting the total for those who can prove their status, you charge an extra 10% to those who can’t prove status. One is a fee added to the total and one is a discount off the total.
Most likely, your processor does not understand how programs like these are executed or doesn’t want to devote the back-of-house resources to maintain a program like this for its customers. Surprisingly, many processor sales agents don’t even know that their company offers programs like this. It’s not usually their fault – the training available in the payment processing space is abysmal at most companies. The Dodd-Frank Act and the Durbin Amendment confirm the legality of programs exactly like this and when structured properly, it is no different than offering $1 off per draft on your brewery of the month feature.
It depends. The first step is to be compliant and offer the program according to best practices. The second is to train your staff on explaining it in laymen’s terms to your customers. We provide not just the Visa-approved signage for each of our cash discount merchants, but cue cards on how staff can explain it to the customer. Even with all this, yes, there will be a few customers who get upset. In our experience, those customers are split – 85% of them continue to come back and pay cash or just accept the fee and 15% of them stop coming. It’s all about the numbers. The number of customers who complain is less than 5% so you’re looking at losing 25% of 5% or under 1% of your customer base. That seems well worth it to offset your entire processing bill.
That depends on you. Here’s some numbers to consider:
- Business revenue from credit cards is $40,000
- Average effective rate is 2.5% ($1,000 per month in fees)
- Owner take-home net-profit $40,000 per year
Eliminating the $1,000 per month in fees would increase take-home net-profit by $12,000 per year. On a $40,000 take-home that is a 30% increase. I’d say that’s worth the headache.
But what if a few customers end up leaving? Let’s explore that…
5 customers are angry and vow to never come back. The business profit margin on sales is 20%. Those five customers spend an average of $75 per month each. On that total it’s less than $94 in take home profit… that’s assuming they spend that every month and the profit margin is truly 20%.
While any business can benefit from a Cash Discount program, we’ve found it’s best for lower average ticket locations that have destination type traffic. Consider the following comparisons:
- Zoos, amusement, and other destination entertainment facilities are a better fit than a health club that has regular customers.
- The beachfront restaurant is a better fit than the local watering hole as the regulars at the local watering hole are more sensitive to changes.
We most commonly see this question from merchants with higher average tickets ($100 and up). They are concerned that customers will balk at an added fee of $2 to $4 per purchase and they are smart to be conscious of the customer’s perspective. The key here is giving options and being clear in communication. There are several strategies that can be deployed on an equipment level or adjustments to your existing payment processing equipment. The idea is relatively simple, but the execution requires in-depth understanding of not just the card brand guidelines, but also equipment programming. Reach out to discuss your specific situation.
That may be true for their specific program. Companies have to make business decisions on how much they are willing to invest to support the goals of their clients. Many processors – like Clearent, Heartland, Chase Merchant Services, Square, and Toast – have made the decision not to make this program available to merchants like you. This does not support or dissuade the position that these programs are viable or necessary. It’s just a decision that specific company has made regarding what they are willing to offer their customers. Federal Law, state law, and supreme court decisions support that this type of program, if executed properly, is fully legal and compliant with card brand guidelines.
There are only three states that prohibit surcharging – Massachusetts, Connecticut, and Colorado. That said, a surcharge is different from a cash discount. Our CD program and terminal technology works within the allowances available in all 50 states to support your ability to avoid the ever-increasing processing fees charged by Visa, MasterCard, and major banks like Bank of America and Capital One.