Merchants continue to look for ways to avoid paying electronic payment processing fees. Cash discount is an option many merchants have turned to in order to save on the processing fees. It may seem simple but, in this attempt to save money, merchants and some merchant service professionals have misinterpreted the Visa rules related to cash discount programs. Recently, Visa published an educational reminder in Visa Business News on how to properly implement a cash discount program.
The Visa rules do not prohibit the act of charging a higher final price to a customer paying with a credit card but it can’t be advertised as “charging more.” Some merchants claim to be utilizing cash discount by stating that there is a normal price and a higher price for payment by credit card. However, charging a higher price for credit card payment is considered a surcharge and surcharging is subject to a separate set of rules.
The proper way to implement a cash discount program is to have a “normal price” for payment by credit card and a discounted price for cash payment. So, the final price is the same but Visa cares how it is conveyed to customers. Here is are simple correct and incorrect examples:
Normal Price (Credit Card): $100
Cash Discount Price: $97
Normal Price (Cash): $97
Credit Card Price: $100
In both examples, the cash price is $97 and the credit card price is $100. The difference is in the way it is conveyed to the customer. Visa points to one industry that properly implements a cash discount program: Gas stations.
Visa also added a friendly reminder that it does actively enforce is cash discount rules. Thus, merchants need to make sure that they properly convey the cash discount to customers. Violations can result in penalties or even the revocation of the ability to process credit cards.