Surcharging vs. Cash Discounts: Finding The Right Payment Approach For Your Business


When it comes to payment processing, striking the right balance between minimizing fees and providing a positive customer experience should be a top priority. However, credit card brands have begun tightening their belts when it comes to surcharging violations, which means businesses could be facing more on-site audits and non-compliance fines than ever before. 

So, what’s the best way forward? Let’s explore the ins and outs of surcharging: the rules to abide by, the consequence of violations, and cash discounting as the alternative approach that might be the answer you’re looking for.

The Basics of Surcharging

Surcharging is essentially adding a fee to customers’ credit card transactions to offset the processing cost. While this practice offers businesses an opportunity to recover processing fees, it is subject to strict rules and regulations imposed by credit card brands and payment networks. 

These regulations vary by jurisdiction and card brand, and it is crucial for businesses to comply with them to avoid penalties and legal issues. Some key considerations include:

Notifying acquirers (sponsor banks) that you are imposing a surcharge

Merchants must give written notice at least 30 calendar days before imposing a surcharge. 

Informing customers about the surcharge

Businesses must clearly communicate the surcharge to customers before the transaction is completed, including the amount, in clear and concise language. 

Only applying a surcharge to credit card transactions

Debit and prepaid cards cannot be surcharged, this is a credit card only fee. 

Limiting the surcharge amount

The surcharge should not exceed the merchant discount rate (MCR) or be higher than 3%. 

Non-compliance with surcharging regulations can have dire consequences for businesses including a damaged reputation and potential loss of customers. It is crucial for businesses to fully understand and abide by the rules surrounding surcharging to avoid these negative outcomes.

Exploring an Alternative: Cash Discounting

The good news is that there’s a viable alternative to surcharging: cash discounting. This approach has gained popularity for its ability to reduce processing fees without violating any regulations. 

Cash discounting offers several advantages for your business. Firstly, it helps lower fees by incentivizing customers to pay with cash or non-credit card methods. This way, you can cut down on expenses and improve your bottom line. 

Additionally, cash transactions generally settle faster than credit card transactions, allowing for improved cash flow. And, by offering discounts for cash payments, businesses can provide an incentive for customers to opt for non-credit card methods while still maintaining positive customer relationships.

Ready to optimize your payment processing? 

Contact DCRS Solutions today to explore the tailored solutions and expert guidance that we offer. We’ll help you navigate the payment landscape with efficiency, help reduce costs, all while providing exceptional experiences.