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What Is Cash Discount Vs Surcharge

What Is Cash Discount Vs Surcharge?

Cash discount and surcharge are two different terms that can be used interchangeably in the context of a business transaction, but they have distinct meanings.

A surcharge is defined as an additional charge on top of the price quoted by a supplier for goods or services to be delivered. It’s often called “extra” cost or “overhead”.

A cash discount is a reduction in the price of goods or services offered by a supplier when payment is made at the time of delivery rather than upon receipt of the invoice.

The difference between these two types of discounts is that surcharges are usually charged upfront while cash discounts are paid later.

Cash Discounts & Surcharges Explained

In order to understand what a cash discount is, it helps to first understand how a surcharge works. A surcharge is simply an extra cost that is added to your bill before you pay it. This may be due to increased costs such as shipping charges, taxes, etc.

In contrast, a cash discount is a reduction on your final bill after you’ve already paid for all expenses related to your purchase.

For example, if you buy a product from Amazon for $100, and then find out that the actual price was only $90, you would receive a cash discount because you’re paying less than the original quote.

The difference between a cash discount and a surcharge depends on whether the discount is applied before or after the total amount has been calculated. If the discount is applied before the total amount is calculated, it is considered a cash discount.

If the discount is added after the total amount has already been calculated, it is considered to be a surcharge.

How Does Cash Discount Work?

To better understand how cash discounts work, let’s take a look at the following scenario:

You want to buy a new car, so you go to your local dealership and ask them about financing options. They offer you a loan with a monthly payment of $200 per month plus interest.

However, the dealer also offers you a special deal where you will pay just $1,000 down and $199 per month for 36 months. So, you decide to accept this offer since it saves you $2,000 over the course of the loan period.

When you make your payments, you’ll get your full $1,000 back. In other words, you’ll end up paying nothing for the car.

This is a perfect example of a cash discount. You’re getting a great deal on a vehicle, but you’re not paying any money until you actually own the car.

When you apply for a loan or credit card, lenders use a similar strategy to determine the amount of cash you qualify to borrow. Typically, they calculate the total amount you owe based on the balance of your current loans.

Then, they add in any outstanding debt (like credit cards) and subtract any cash savings you might have.

If you can show that you have enough money available to cover both the initial deposit and the monthly payments, you should qualify for a lower rate. That’s why many dealerships offer zero-percent financing deals.

These deals allow customers to finance their purchases without having to put any money down.

If you don’t qualify for a zero percent financing deal, you can still negotiate a cash discount. This is typically done during the sales process, which means you need to know exactly how much you’d like to spend on the vehicle.

Once you’ve decided on a specific price point, you can tell the dealership that you won’t pay more than that amount.

For example, let’s say you want to buy a used car for $5,500. The dealer quotes you a monthly payment of $250. But, you realize that you can save $1,000 by buying the car for $4,500.

So, you tell the dealer that you’ll only pay $3,500 for the car. Since you’re willing to pay less than what the dealer quoted you, you qualify for a cash discount.

Cash Discounts Can Be Used With Any Credit Type

While most people think of cash discounts when shopping for cars, these types of deals are applicable to all kinds of financial products. For instance, if you’re looking to refinance an existing mortgage, you may be able to get a lower rate if you agree to pay off some of your principal early.

In fact, you could even use a cash discount to reduce the amount of time you have to repay your student loans. By agreeing to pay off a portion of your debt now, you could shave years off your repayment schedule.

Benefits Of Surcharge

Surcharges are different from cash discounts because they aren’t tied to the purchase price of the product. Instead, they’re calculated based on the type of credit you have.

For example, if you have excellent credit, you may qualify for a 0% APR. If you have bad credit, you may qualify instead for a higher APR.

The benefit of this approach is that you can shop around for the best rates without worrying about whether you qualify for a particular loan. When you apply for a loan with a low-interest rate, you may find that you qualify for a better rate at another bank.

However, there are also drawbacks to using a surcharge. Because it’s tied to your credit score, you may end up paying more for the same product.

How To Negotiate A Cash Discount Or Surcharge

When negotiating a cash discount or surcharge, make sure that you bring along your contract. You’ll need to provide proof that you can afford the new payment.

You should also ask the salesperson how long he or she expects you to keep making payments before you decide to stop. Ideally, you shouldn’t have to continue paying for more than two months.

When you first start shopping for a car, you should focus on finding a good deal. However, once you’ve found one, it’s important to remember that you can always negotiate a better deal.


In conclusion, knowing the difference between a cash discount and a surcharge will allow you to decide which route is best for you and your purchase. Don’t forget you can always lean on our credit card processing resource page for more information. 


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