Progressive Payment Solutions

Does Cash Discounting Work for My Business?

Many businesses look to cash discounting to save money on credit card processing, but aren’t sure if it will work for them. Find out if it’s allowed where you are, and what you need to do to use it.

These days, a small business needs every advantage they can get.

That’s why most business owners are on the lookout for ways to save on their bottom line, while also making sure it won’t negatively affect their customers. 

Many have heard about cash discounting as a way to do just that.

However, some aren’t sure if it will work for their business.

Is it allowed in their state?

Will it be hard to implement?

Find out the answers to these and other questions below.

But first, let’s talk about what cash discounting is and is not. 

What is cash discounting?

Cash discounting is as it sounds: giving a discount to a customer who pays in cash.

How does it work? 

Basically, the posted price for goods or services is the price if the customer pays in cash. However, the customer would pay that price (plus a small fee) if they choose to pay with a credit card.

The fees for using a credit card can vary and average around 3-5% of the total.

Let’s use an example to illustrate:

Alex owns a bakery that uses cash discounting.

A customer comes and buys a box of pastries, which comes to $10.00. That customer uses cash to pay for their items. The total amount owed is $10.00, which is the advertised price for that item.

The next customer comes in and buys the same box of pastries. Again, these items come to $10.00. 

However, this customer chooses to use their credit card to pay. What is the total this time? The advertised price of $10.00 is if it’s paid for in cash. So there needs to be a small fee added on if they pay with a credit card instead of cash. 

That means the total for the second customer comes to $10.39 if they choose to pay with their credit card, which includes the 3.9% fee the bakery charges for using credit cards. 

This motivates that customer to choose to pay with cash instead to save money.

Simple, isn’t it?

At this point you might be thinking, “But can it work for my business?” Find out the answer below.

Which businesses can use cash discounting?

Many doubt that they can use cash discounting because of how laws and regulations differ from state to state. Fortunately for you, this isn’t the case with cash discounting.

The fact is, cash discounting is allowed in all 50 states. So no matter what state you live in, your business can utilize cash discounting to save processing fees each month.

To help you be sure you can use it, legally, feel free to read about the Durbin Amendment 2 (part of the 2010 Dodd-Frank law) in this Congressional research paper

You’ll see that this amendment allows businesses to offer a discount to customers to encourage them to pay by alternative methods other than credit/debit cards. These alternative methods include checks or cash in order to receive a discount, which is applied at the time of sale.

Some confuse cash discounting and surcharging. But surcharging and cash discounting are not the same.

Cash discounting is basically advertising the price for an item as the price paid in cash. That item’s price changes if it’s paid for with a credit card.

Surcharging is advertising the same price for an item, regardless of how the customer pays. That customer is then charged extra for using a credit card to cover the costs of processing that transaction.

It might appear that they are basically the same. However, surcharging is illegal in a number of states, and a business is required to go through steps that differ greatly in comparison to cash discounting.

If you need to learn more about the subject, take a look at our surcharging article where we go into much greater depth on what surcharging is.

Now that you know you can use cash discounting with your business, you’re going to need to know what

What do I need to know to use cash discounting?

Before you go and start charging less for cash transactions, you need to make sure you use cash discounting the right way.

In fact, it’s illegal to implement cash discounting yourself. Why?

The credit card associations (Visa, Mastercard, Discover, and American Express) forbid any business from changing prices from a credit card transaction without taking the necessary steps to get approved. 

It’s also important to note that getting independently approved by these card associations isn’t easy. Following all of the steps and meeting the requirements for doing this is a difficult, time-consuming process for any business to implement on their own. 

These standards are there for the consumer’s protection. Since cash discounting allows an automated discount for cash, there’s a good chance it won’t always be implemented properly. 

This will result in illegally profiting off of a credit card transaction if a business charges a client more than they are charged to accept the transaction by the processor. 

That’s why PPS wants to make things easy for businesses with our own Cash Discount Program

So instead of having to worry about heavy fines from breaking the law, we take care of everything for you. That way you can enjoy all of the advantages of cash discounting for your business without any of the hassle or stress.

Have questions about cash discounting? We have answers. Contact us today to find out anything you need to know about cash discounting or how you can save money by reducing your payment processing fees.


Successfully running a business is a constant uphill battle—especially if it’s a small business. But that doesn’t mean everything has to be difficult.

One major win for many businesses is that cash discounting is legal in all 50 states. That means they can legally reduce or even eliminate their credit card processing fees, saving them substantial money each month.

Curious to see how much your business will save with cash discounting? Find out in just a few seconds. Enter your monthly credit card processing volume here to see exactly how much your business will save per month with cash discounting.

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