What is cash discounting?
You may have heard that last month that Visa came out with a bulletin stating that some programs marketed as “cash discounts” were “non-compliant” with Visa’s rules. One merchant remarked to me that it’s ok – we don’t surcharge anyway. It’s illegal.”
So what’s the difference? Generally speaking, a surcharge is a fee that is added to the cost of goods or products simply for the convenience of paying with a credit card. So a surcharge is specific to using a credit card. So for example, in some establishments (where it is legal) a purchase made with a credit card has a 2% fee assessed toward the transaction. If you had paid in cash, there would be no additional fee assessed.
However, in cash discounting, a service fee is applied to all transactions. However, should you pay in cash, the merchant will remove the fee for that purchase since you paid in cash.
So according to Visa, this violates their rule as it encourages merchants to add a fee to the normal price, and then remove it at the register if the customer pays with cash, check or debit.
So why is cash discounting attractive to merchants? We will look into that in our next post.
Below are some helpful links which explain cash discounting and Visa’s bulletin.
pymnts.com Visa says…
CC Sales Pro – Visa declares…