Best Cash Discount Program | Cash Discounting vs Surcharge



Cash Discounting and surcharging are two different things that you might have heard about. When you are doing any of the credit card transactions, you might have seen both of these. We will be seeing everything you should know about both of them. Many people are confused when it comes to Cash Discounting vs Surcharging. We will clear all your doubts here.

The next time you see the surcharge been deducted from your credit card, you won’t have to wonder what is it. So, let’s begin the comparison of Cash Discounting vs Surcharging and see what are they.

We will start with surcharge and then we will know about cash discounts.


What is a surcharge?

When you are in any of the cash discount programs, you might have seen some surcharge is deducted from the card. The surcharge is a small fee that any vendor can add to the credit card transaction. This is the fee that is charged by the credit card association to the vendor.

To recover all the fees charged by the credit card association, the vendors might include the small surcharge. During any Cash Discount Merchant Processing, it anatomically deducts the surcharge fee from the customer.

This is not available for debit cards. Only credit card holders can give out the surcharge fee. Therefore, you will see the surcharge only on the credit card transactions. There are certain guidelines issues to the card association on how the surcharge is charged.

Also, it is not permitted in several areas. So, if you are from one of the areas such as New York, Maine, Kansas, Oklahoma, Florida, California, Texas, etc, you won’t be charged a surcharge. In the same way, the vendors can’t add the surcharge.

Let’s say a customer has to pay 100 bucks for an item. The credit card association will charge 2 bucks fees from them.

So, the merchant will add 2 bucks as a surcharge, the customer will have to pay 102 bucks. In this way, the merchant can recover the money.


What is cash discounting?

Cash discounting is just like the name says. It is a discount you will get if you pay using cash. The merchant has to pay the processing fees of credit card if the customer chooses to pay with the credit card. So, the merchant will surely increase the price to recover the fees.

Now, if the customer decides to pay via cash, there is no need to charge extra fees, right? So, they will get a cash discount. The cash discount is only applicable if the customer pays via check or cash. A cash discount is a great alternative to a surcharge.

Continuing the example, if a surcharge is illegal then what will the merchant do? Well, they will simply increase the product price to 102 and offer a cash discount of 2.

Now, if the customer pays using a credit card, they will have to pay 102 but if they pay using cash, they will only have to pay 100. The 2 bucks discount will be given here.

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