Understanding Cash Discount Programs

Do you think the term “cash” is only relevant for brick-and-mortar operations? Think again! Even if your business only accepts payments or subscription management online, your customers—and your bottom line—can benefit from a cash discount program that eliminates credit card processing fees from select transactions.

In this article, we’ll review how cash discount programs work, their benefits and how you can start your own program, fast.

What is a cash discount program?

If you’ve purchased anything or set up a subscription online, you’ve probably come across businesses offering cash discount programs. So how can online businesses even discuss taking cash?

First, let’s define what “cash” means regarding digital payments. Cash refers to transactions that do not go through a card network. This includes:

It does not include transactions processed through a card network, like:

  • Credit card payments
  • Debit card payments

Cash discount programs allow customers to pay less for their purchase when using cash, check or ACH, while those paying with a credit or debit card pay more to absorb the credit card processing fee.

How do cash discounts impact compliance?

It’s important to note that the acceptance and legality of cash discounts and surcharges can vary by region and are subject to local laws and regulations. Some locations may have rules or laws that govern pricing strategies to protect customers from unfair practices, so be aware of the relevant regulations in your area before implementing a new pricing strategy.

Remember: you can offer discounts for cash, but you cannot post the cash price and then charge a higher price for cards unless both options are presented clearly. Think of what you see at gas stations—generally, the cash and card prices are posted together, side by side.

What are credit card processing fees?

You must understand payment gateway and card fees if you’re new to online payment processing. These fees, charged per transaction, cover the cost of processing payments and moving funds from your customer’s account into yours via the credit card networks.

Credit card processing fees can range from 1.5% to 3.5% of the total sale. If you’re processing hundreds or thousands of transactions a month, those fees can add up to substantial revenue!

Save money by ensuring you’re getting the best rate per transaction through your payment gateway. Offer cash discount programs for cash, check and ACH payments that aren’t processed through a credit card network to reduce your total cost per transaction.

How do cash discount programs work?

When you offer a cash discount online, buyers can choose a payment method that reduces their total purchase price.

Here’s how a typical cash discount program works:

  1. Standard Price: The business sets a standard or regular price for its products assuming customers will pay with a credit or debit card or a method that incurs processing fees.
  2. Cash Price: Customers are offered a discounted rate if they choose a cash payment method at checkout. The discount is generally equal to the card processing fees.

Customers can choose to check out with the standard price if they plant to pay with a credit or debit card or opt for the cash discounted price if they’d prefer to pay with ACH or check.

If customers are willing to pay the higher standard price, why offer a cash discount at all? When customers are presented with a price discount, it’s perceived as a monetary gain and a higher level of savings for a product, making them more likely to complete the purchase to take advantage of the opportunity.[1]

“As always, we encourage customers to look at their customer retention strategy and work with their internal teams to determine if a cash-discount program is the right choice for their business,” says Dan Nadeau, co-founder of Payway. “If they decide it is, we are here to support them. The nice thing about our program is customers can stay on their current gateway, so there’s little to no impact to current business operations.”

Cash discount vs. surcharge: What’s the difference?

So what’s the difference between a cash discount and a surcharge? These are two different pricing strategies businesses use to incentivize or discourage specific payment methods. If a cash discount program is implemented correctly, it is not bound by the same rules and requirements regarding legality and compliance.

The purpose of a cash discount program is to encourage customers to pay promptly and reduce the administrative costs associated with card processing. This rewards customers for choosing a cash payment method, accelerates cash flow and potentially reduces overall transaction costs.

On the other hand, surcharges add additional fees to order totals for customers that choose more expensive payment methods. These surcharges cover the higher costs associated with processing card transactions.

Ultimately, the primary difference between a cash discount program and a surcharge is the direction of the price adjustments. Cash discounts reward customers for using a cash payment method with a lower total price. In contrast, surcharges add an additional fee at the end of the checkout process to cover the card processing fees.

While the two methods achieve the same goal of ensuring customers cover the card processing cost, they are often perceived differently.

Surcharges can discourage customers from using higher cost payment methods, but they are sometimes perceived negatively as customers feel they are penalized for their chosen payment method.

Discounts are often viewed positively, as they are perceived as a reward, making them more attractive overall than a surcharge.

Benefits of cash discount programs

Clearly, there are significant benefits to cash discount programs for online and brick-and-mortar businesses, but especially for subscription-based businesses. Since subscription businesses process recurring payments, they can offer a discounted rate for subscriptions if customers choose to pay via ACH, reducing processing costs and administrative burdens for the lifetime of those subscriptions.

Cash discount pros

  • Eliminate card processing fees for cash transactions and let customers paying with credit and debit cards absorb the processing fee included in the standard price.
  • Reduce pricing disputes, fraud and chargebacks.
  • Attract bargain hunters who are more willing to make purchases when they receive a discount.
  • Encourage customers to pay using a lower cost, lower effort payment method.
  • Minimize development work required for managing subscriptions and recurring payments, with limited impact to existing subscription management applications.

Cash discount cons

  • If your business has a physical location, you may encounter customers who don’t carry cash and may be opposed to paying without a discount.
  • Research shows that customers generally spend more with a credit card since it defers the payment entirely.

How to Get Started with Cash Discounts

Ready to start rewarding your customers? Then it’s time to set up your cash discount program. Fortunately, this program is fully automated following a one-time price increase to accounts for standard transaction fees.

As you may have guessed, Payway has cash discount capabilities built into our payment gateway. In fact, we were the first recurring payment solution to offer a true cash discount program for online businesses.

Implementing a cash discount program is fast and easy with Payway, and it can lower your administrative costs and provide customer incentives. If you’re ready to get started or want to explore your options, contact our concierge support team, or see how much money you can save when you switch to Payway with our free cost analysis.


Cash discount programs are a great way to reward your buyers, eliminate card processing fees and reduce administrative burdens. See how you can leverage zero-cost-processing for recurring payments while incentivizing your customers.













[1] Effects of price discount on consumers’ perceptions of savings, quality, and value for apparel products: mediating effect of price discount affect (Source)





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