·  Legal News, Analysis, & Commentary


Are Cash Discount Programs Legal?

— March 8, 2022

Cash discounts have been legislatively permitted to be implemented in all 50 states.

Yes. Cash discount programs are allowable, as they offer customers discounts for paying cash or “regular price.” However, the program must be offered to all customers equally, without discrimination. When setting up a cash discount program, it is important to ensure that all details are communicated to customers.

Often, customers are reluctant about the legitimacy of cash discount systems and believe that they can’t be administered in their respective states. The good news — this belief has been debunked. Cash discount programs, such as, have been legitimized under the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. The FTC (Federal Trade Commission stated that a person can offer their customers a discount or coupon if they pay with cash or debit card. 

The Durbin Amendment defines the word “discount” as a means of reduction made under the exact price relayed to the customer. The amendment clarifies that a discount must be a decrease in price—not an increase. Merchants can offer a lower price in exchange for cash acceptance. However, they are prohibited from gaining the system by posting a price for cash and charging a higher price for cards.

By federal judgment, PCNs (Payment Clearing Network) cannot halt business owners from offering their customers discounts or other incentives for using a certain form of payment as long as it is offered and properly disclosed to the customer.

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Photo by Monika Rams on Unsplash

Cash discounts have been legislatively permitted to be implemented in all 50 states. Presumably adhering to federal law requirements, cash discounts can be valid everywhere, and merchant customers are almost immediately notified of the discount. 

This proves that cash discount programs are covered both locally and nationally.

It is important to note that gas stations across the United States have been using cash discount programs for years. Today, officials have made it apparent that any business is liable to use them.

Businesses may offer a cash discount as long as the customer explicitly explains the process. Reliable cash discount systems will handle this in four manners:

  1. Signage at the start of the business, as it concisely explains the cash discount 
  2. Signage at the register (for online businesses, at checkout)
  3. A verbal offer of said discount (example: “Your total is $45.10 would you like to save $2.50 by paying cash?”
  4. A receipt system defines the specific cash discount, notifying customers of exactly what was charged and why.

Cash Discount Programs Are Exceptionally Beneficial For Business

Business owners and consumers reap the benefits of cash discount programs in a few ways. These benefits include:

  • Reduced Fees. This is a given as merchants can reduce processing fees that penetrate their profit margins while consumers dodge credit interest rates on small purchases.
  • Less Debt. Merchants can retain more profit and reduce credit card charge-offs. Consumers are highly unlikely to accumulate significant credit card debt.
  • Simplicity. A discount program is simplistic enough for business owners and employees to understand in lieu of all the prices in the store to set to a built-in service fee that is drastically deducted when paying with cash. The simplicity alleviates pricing disputes, processing fees, interest rates, and other complicated accounting measurements.

According to LinkedIn, businesses owners benefit from the cash discount programs as it allows them to accept credit cards while alleviating 80-90% of associated fees. 

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