credit card cash discount legal

A customer wanting to pay for an item with their credit cards has proven to be a curse as well as a blessing for small-time owners. Providing the customers with different options to pay with credit card cash discount legal policies makes it more accessible for them to purchase a product. But, the seller has to bear the cost of interchange fees which is more commonly known by the term “swipe fees.”

The fees for a debit card purchase is typically set to a reasonable 0.20$-0.30$ whereas the fees for a similar credit card purchase is set anywhere between 1% to 4%. The fees for debit cards used to be at a high percentage of 0.40% before the Act was passed.  But, even at its highest the fees for a debit card was still a lot lower to that of credit cards.

For wealthy enterprises, this fee can be a very negligible amount but, for small businesses that tiny amount can turn their profit into a loss. When the small business owners voice their concerns and want to share this cost with the buyer then the law comes in-between.

As an outcome of this, we saw small-time business owners trying to find a solution to this so they could continue to issue credit card cash discount legal offers without having to bear all the swipe fees cost. A solution came about in 2011 when the government made cash discounts legal across all 50 states in the United States of America. A major portion of the general public is still not clear as to what the law means for them. To understand this, we will first have to explain what the difference between surplus charge and cash discount program is.


A surcharge is a fee that is added to the existing tax on the product. About 40 states give the surcharge fee to the customers who pay with credit card. The states that don’t allow surcharge are Connecticut, Kansas, Florida, Maine, Massachusetts, California, and Colorado. One factor of this is that it isn’t valid on debit cards.

Credit card cash discount legal program    

Cash discounts are not the same as surcharges as they do not charge a fee to a transaction made by a credit card. Cash discounts or credit card cash discount legal can be termed as a reward for those customers that pay the amount by cash and not by credit or debit card. A payment made by cash helps merchants to save the fees that otherwise they would have to pay. The small charges on every credit card swipe amount to a big number at the end of the month. This amount is harder for small business owners to pay again and again.

A verdict on the credit card cash discount legal programs can be found in the Durbin Amendment 2 where it states that “small businesses are permitted to offer a discount to customers as an incentive and to encourage customers to pay by alternate methods other than a credit/debit cards.” The alternative methods can include cash or checks.

A cash discount or credit card cash discount legal works when a small fee is added to transactions made by all customers. This fee is deducted from the total amount when the customer chooses to pay by cash. This makes the customers feel that they got a discount on the product which was the intention of the company all along. For a cash discount to be legal, the customer must have a receipt which mentions in detail the cash discount amount and service fee.