Surcharge vs Cash Discount – What’s the Difference?

Posted: March 23, 2018 | Updated: February 5, 2021

Surcharge vs Cash Discount – How They Differ

There has been a lot of talk about cash discount programs and surcharging recently. Though these two payment processing programs have similarities they are not the same. Here is how the two differ.

What are credit card surcharges?

A credit card surcharge is a fee that is assessed at the time a credit card is charged. The small fee is usually added to an existing tax at checkout. This fee is only applied because the transaction was completed with a credit card and is used to pass the cost of the transaction on to the customer. With this program, only credit and transactions see a surcharge and that charge is specifically for processing that card. Problem is with surcharging you are not allowed to apply fees to debit cards and surcharging credit cards is not allowed in all states. Only 40 of our 50 states allow for credit card surcharges.

What are cash discounts?

Cash discount programs apply a “service fee” to all transactions (rather than just credit cards). When a customer pays in cash the fee is discounted. The federal government has ruled that it is illegal to not allow merchants to give a discount for using cash. So in this program, not only is it available in every state, but it is also able to apply the service charge to debit card transactions as well. The fee is usually around 3.5% and covers the cost of the transaction. With cash discount, the merchant receives 100% revenue from their sales. Since the customers pay the cost of their own transactions the merchant pays nothing for transaction costs. The only cost to the merchant using the cash discount program is a small monthly fee for the processing account. The resulting savings for the merchant are considerable.


Both the cash discount program and surcharging result in the customer paying their own credit card transaction fees. Surcharging is not allowed everywhere and only credit cards can be surcharged. The cash discount program is federally recognized and legal everywhere. It also allows the merchant to apply the service fee to debit cards as well as credit cards. Utilizing the cash discount program, merchants can receive up to 100% of their revenue and only pay a small flat fee for the merchant account each month. The cash discount program is by far the least costly merchant account available.

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Categories: cash discount program, Credit Card Processing, Credit Cards, Customer Service, Merchant Services

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