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Is the Cash Discount Program Legal

Is The Cash Discount Program Legal?

Cash discount programs are an excellent way to promote quick payment, improve customer retention, and reduce your credit card processing fees.

Offering a cash discount can incentivize customers to pay in cash instead of by card which will reduce costs for your business.

However, is it legal to offer a cash discount? Many business owners worry that offering this program may not be legal in their state or are unsure of how to implement a program that is fully compliant with the law.

In this article, we will look at the legality of a cash discount program and what steps you need to take to implement one that is fully above board. 

Let’s get started.

What Is A Cash Discount Program?

A cash discount program offers a discount to any customer that chooses to pay in cash instead of by credit card.

Some businesses also extend this program to quick payment of invoices and will offer discounts to customers that settle their bill within 7 or 14 days instead of waiting until the due date, which is typically 30 days.

Why Offer A Cash Discount Program?

Although credit card payments are very popular and easy, they can be a financial drain for businesses. Every payment taken by credit card attracts several fees that the business must pay.

These include transactional fees, interchange fees, monthly fees, and equipment rental fees. Depending on the card used and the circumstances of the transaction, this can add up to 3% to 5% of the transaction. 

For small businesses that already have small profit margins, these fees can be too much. Offering a discount for cash purchases encourages customers to use cash instead of a credit card and reduces these fees. 

Receiving payments in cash instead of by credit card also reduces the number of “friendly fraud” or chargebacks against the business.

Customers can ask their credit card company to refund transactions if they are unexpected or fraudulent, but this is sometimes abused to refund legitimate purchases.

As chargebacks are debited straight from the business’ account, they can cause cash flow problems. 

A cash discount program can also help your business grow. If customers know they can get a discount then they are more likely to become return customers. It can help you match, or even beat, the prices offered by your competitors, too.

Is A Cash Discount Program Legal?

The good news is that yes, cash discount programs are legal in all 50 states. They were made legal per the Durbin Amendment (part of the 2010 Dodd-Frank Law) which confirms that businesses are legally able to offer discounts for cash payments.

However, that doesn’t mean that a business can implement a cash discount program in any way they choose. There are rules and regulations to keep cash discount programs legal.

Why Are There Rules and Regulations?

Although cash discount programs are legal, profiting from additional fees on credit card payments isn’t. This may sound confusing as customers that pay by card will be charged extra than those paying by cash, so let’s explain it.

Businesses can charge a surcharge for taking payment by credit card but it is illegal to charge more than the fees amount to.

However, even this surcharge is currently illegal in 10 states (California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas) where any credit card processing fees must be included in the full price of the goods.

Charging a surcharge for debit card payments is illegal in all 50 states.

This is why you need to be careful with how a cash discount program is implemented and labeled. If it is wrongly seen as adding surcharges for card payments instead of discounts for cash, you could be breaking the law.

How To Stay Legal

To set up a legal cash discount program in your business, here are some of the steps you need to take. To ensure full compliance with the law, you can consult a merchant services account representative.


It’s very important to correctly signpost that you offer a cash discount program. There should be a sign at both the entrance to your business and at check out that has the most important details of the program.

It doesn’t need to go into great detail, but post that a cash discount program is available and how much the discount is.

Signs make sure that your customers know about the program and that it is a discount for cash, not a surcharge for credit cards.

It’s not necessary to label every item in the store with a regular price and cash discount price, although you can do this if you wish.


When a customer pays in cash and gets a discount, this needs to be clearly marked on the receipt and labeled as a discount. 

The full price of the goods or services should be listed first and then the amount of the discount highlighted and included separately.

This makes it easy for everyone to see that a discount for paying in cash has been applied to the regular price.

Any receipt for a credit card payment will have the same full price, but without the discount listed.

Verbally Offering A Discount

Cash discount programs need to be clear and transparent so offering them verbally to your customers is important. Every staff member needs to be fully aware of the program and able to explain it to customers at the checkout.

They should verbally confirm that a discount is being applied for cash and how much it is, as well as offer it to other customers that choose to pay by card.

Final Thoughts

Cash discount programs are legal in all 50 states and are a useful tool for increasing custom and reducing credit card processing fees.

There are rules to follow if you want to implement a cash discount program at your business and as long as they are followed, you can offer cash discounts without any legal problems. We have put together a large processing resource page to learn more. 


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