What is the difference between a surcharge and a cash discount program?

As the credit card processing industry relentlessly progresses, the concern regarding surging interchange fees and payment processing charges also aggravates. Merchants want to offer their valued customers all kinds of payment methods for a better point of sales experience. Debit or credit cards stand among the most desired ones. However, offering such choices comes with a high cost, especially for small businesses. Bearing the burden of merchant processing outlays can deplete a large chunk of the earnings.

In search of easing the obligation of various merchant ventures, cash discount programs and surcharge programs have become quite popular. As explained in our previous blogs, cash discount programs are being used as a way to lower the payment processing obligations. Surcharge programs also stand complementary to suit the same purpose.

What are surcharges? How do surcharges differ from cash discount programs? Let us unwind the basics regarding these types of programs. Learn about the benefits of a cash discount program.

Introduction to Surcharges

A surcharge refers to the additional charge that merchant businesses levy on their customers that make payments via credit cards. This charge acts as a means to recoup the fees that credit card companies impose on merchants for credit card processing services. The surcharge levied varies according to the card association.

Merchants need to file an application with their relevant card association to be able to charge a surcharge. A card association is nothing but a bank network that collaborates with established card companies like MasterCard, Visa, and American Express. You must adhere to the surcharge enrolment guidelines your respective card company outlines. Merchant entities have to deliver a notice of a minimum of 30 days to their acquirer bank and credit card company before applying surcharges on their products. Generally, most card companies require merchants to provide the following details while filing their applications to levy surcharges.

  • Name of your business entity
  • Contact info like business address, phone number, or email id
  • Type of surcharge
  • Channel type of your venture (This includes options like eCommerce business, brick & mortar venture, or mail order)
  • Number of locations of your premises where you wish to apply surcharges

Some limitations related to the usage of surcharges in the US

Legality issues in some states

Remain mindful that retailers in some US states cannot legally impose surcharges on their customers’ card payments. Federal laws bar merchants in some US states from adding surcharges or convenience fees to their client purchases made using credit cards. Presently, Kansas, Colorado, Maine, Connecticut, and Massachusetts are the five states where credit card surcharges cannot apply. 

Increased compliances

The merchants who are legally permitted to implement a surcharge program often get fed up with the regulatory compliance pressure. There are regulations related to the maximum percentage of surcharge you can levy on your customers. Furthermore, the surcharge rate unanimously remains equal, irrespective of the card company or plan of the specific customer. The task of adhering to the multiple forms of guidelines of various card associations becomes a headache sometimes.

The distinction between Cash Discount and Surcharge Programs


Since surcharge and cash discount programs act as two of the most adopted avenues by merchants to lower their overall credit card processing costs, we need to realize the difference between them. The two programs might sustain similar goals for the merchants, but there are some stark contrast points between the two.

  • Cash discount programs act as a means where merchants offer discounts to cash-paying customers to reduce the burden of credit card processing fees. On the flip side, surcharges involve charging extra sums over and above the original sale price to clients paying via credit cards to cover the payment processing cost.– Surcharge programs have limited usage. Merchants cannot implement them for debit cards, ACH payments, or cash payments. However, merchant businesses can utilize cash discount programs beyond credit card payments.
  • Surcharge programs have limited usage. Merchants cannot implement them for debit cards, ACH payments, or cash payments. However, merchant businesses can utilize cash discount programs beyond credit card payments.

  • Usually, cash discount programs are lawfully executable for all types of merchants in the US. As discussed earlier, surcharge programs are not always legitimate as per the regulatory provisions in the US states. They have a lot more compliance requirements than cash discount programs. The level of autonomy available for merchants with cash discount programs is much more than surcharge programs.

How to make the smart choice between surcharge and cash discount programs for your merchant service needs?

Peruse your competitors move regarding what type of program should you implement

You do not want to make a decision that can make you appear lesser than your competitor ventures. Try to research the type of payment programs that the majority of the counterpart merchants have adopted in your industry. Check out the response they tend to receive from the significant customer base. Any action in the wrong direction can make you lose your valued clients to your competitor. Thus, assess what policy works best overall for your business niche.

Analyze your customer preferences 

While some techno-savvy customers have a more considerable inclination to use debit/credit cards for all forms of transaction, some others still stick to cash. You must evaluate the needs of your prominent client base before choosing the path ahead regarding surcharging or discounting. Forcing your clients to use any one of the options can also act detrimental for your business. Try to make a decision that gels with the needs of your customers.

A large chunk of merchants in the market show an inclination towards using a cash discount program. However, the ultimate decision regarding the choice of the program depends on various factors unique to your business.

Setup a first-rate cash discount program for your merchant venture with Beyond Bancard!

If you seek to implement an innovative cash discount program with the best features, contact our team. Beyond Bancard holds a stellar reputation in the merchant service niche. It can tailor a promising cash discount program to suit your requirements. Get in touch to know more!


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