Merchant Processing Cash Discounts

Cash Discounts

A Deep Dive

Every day at Professional Solutions, we get several calls regarding cash discounts. Business owners have seen offers or been approached by merchant processing companies promising “no-fee processing” or “FREE merchant processing ” with the implementation of a cash discount program.

If your first instinct is that such offers are too good to be true, you’re correct. While these claims can be intriguing, they are misleading.

It’s not that all cash discount programs are bad. Many business owners find they work well. The problem is, there are many different programs out there – some making confusing claims. So, before you decide if a cash discount is right for your business, it’s important to understand what it really is, how different programs work and what to watch out for.

What is a Cash Discount?

A true cash discount program is when customers who pay by cash or check receive a discount and pay less than the regular price. If someone pays by credit card, they will pay the normal price you have posted without the cash discount. It really is that cut and dry (or it should be).

Cash discounts came about as a way for businesses to recoup credit card processing fees. This is understandable, but the waters start getting muddy when some companies profit from cash discount programs, instead of just making up for processing fees.


Cash discounts have nothing to do with surcharges. The terms “surcharge” and “cash discount” are often used interchangeably, which is incorrect. The listed or posted price of a service or product is the regular price. If you charge customers a fee on top of that price, that is a surcharge. At Professional Solutions, we advise against surcharges.

When Lines are Crossed

Some available cash discount programs make it easy to tack on various fees that are passed on to your customers who pay by credit card. For example, some programs allow businesses go up to 10% for a “cash discount.” Remember, the true intent of a cash discount program is to recoup processing fees, which are generally no more than 4%. So instead of breaking even, these companies are making a profit.

Professional Solutions’ Approach

At Professional Solutions, we work hard to provide an outstanding processing program in service and price. We want you and your customers to be happy; therefore, we do not encourage you to pass extra, unnecessary fees to your customers. (Just because you can doesn’t mean you should.)

What to Watch For

If you see a cash discount program offered that touts no-cost or free processing, be wary. The costs are just buried somewhere or called something else. No credit card processing can be free. Someone has to pay those fees, because accepting credit cards comes with a price. It is credit, after all, and credit carries a certain amount of risk.

Professional Solutions, as your credit card processing company, and the credit card associations like Visa® and Mastercard® take on the risk for you so you can offer that payment option. Fees are incurred to cover some of these risks.

Look Before You Leap

When our customers call, saying they are thinking about switching to a company with no-cost or free processing, they often talk with Roger Miller, Account Representative. Roger’s goal is to help business owners understand what making a switch could really mean in terms of pricing and fees.


He shares the following advice:

“Let’s say you pay 2-2.5% in fees with Professional Solutions. The other company may suggest you charge your customers 4%. Remember, it costs you 2.5%. Where does that other 1.5-2% that your customers are paying go?

It goes to the credit card processing company. They get the 2.5% PLUS the extra 1.5% from your customer. That’s quite a profit.

If you want to implement a cash discount, why not raise the actual cost of services and products by 4%, continue to pay Professional Solutions the lower price of 2.5% and keep that 1.5% in your own pocket instead of giving it to a credit card processing company? It would be a true cash discount. Prices advertised would reflect the 4% increase. When a customer pays with cash, you would take 4% off the price. It seems like a win-win for you as a business owner AND the customer.

If you’re processing $10,000 a month, 1.5% would be $150. Why shouldn’t YOU keep that extra money instead of giving it to a credit card processing company?”

Now What?

We know cash discounts can be a confusing topic. It’s hard to know what to believe. Things can be even more complicated for certain types of businesses. (For example, for health care providers, a cash discount program could complicate payments for Medicare, insurance copayments, HSAs, etc.)

At Professional Solutions, we’re here to help! Our goal is to always do the right thing for you and your customers while being transparent.

Whenever you have questions, please give us a call at 1-800-232-2791. We’d love to talk with you about the pros and cons of cash discount programs. If you decide to implement one in your business, we can help make sure you implement a true cash discount program the right way so you don’t get in trouble. We truly want your practice to be successful and your customers happy.

We recommend that health care providers consult an attorney for specific legal advice before implementing a cash discount program.

The credit card processing program is administered through Professional Solutions Financial Services, a division of NCMIC Finance Corporation.