Cash Discounting vs Dual Pricing vs Surcharge

Last updated on May 19th, 2025 at 02:39 pm

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As a Small Business Owner (SBO) it is imperative that you recognize the difference between a Cash Discount Program vs Dual Price Program vs Surcharge Program, so that you don’t get sold a Surcharge Program disguised as a Cash Discount Program or a Dual Price Program.

Fortunately, the distinctions are not terribly hard to recognize.

In the most simplest of terms;

Cash Discount Program: when a Customer is given the option to pay with cash, the Customer pays ‘LESS THAN’ the POSTED SHELF PRICE or POSTED MENU PRICE.

Example:

Shelf Price = $10.00; Merchant offers a 3% percent Cash Discount; Customer will pay $9.70.
($10.00 minus 3% Cash Discount equals $9.70)

Dual Price Program: THE SAME AS CASH DISCOUNT PROGRAM except that BOTH CREDIT PRICE and CASH PRICE are posted on the SHELF and also on the MENU and also on the TERMINAL.

Surcharge Program: when a Customer chooses to pay with a credit card the Customer PAYS MORE than the POSTED SHELF PRICE or POSTED MENU PRICE.

Example:

Shelf Price = $10.00; Merchant charges a Surcharge of 3% percent; Customer will pay $10.30.

($10.00 PLUS 3% Surcharge equals $10.30)

Another way to make the distinction simple is:

• When you ADD TO the POSTED SHELF PRICE or POSTED MENU PRICE it is a Surcharge Program
• When you SUBTRACT FROM the POSTED SHELF PRICE or POSTED MENU PRICE it is a Cash Discount Program or Dual Pricing Program

In the event the SBO is advertising a ‘Cash Discount Program’ or a ‘Dual Price Program’ in their store to their Customers, when in actuality, it is a ‘Surcharge Program’, and the credit card company gets wind of this activity, the repercussions to the Small Business Owner can be very serious.

NOTE: If a ‘SERVICE FEE’ or a ‘NON-CASH ADJUSTMENT’ is ADDED to the POSTED SHELF PRICE or POSTED MENU PRICE, and then immediately removed when a Customer opts to pay with cash, THIS IS NOT A DISCOUNT since the Customer did not pay a ‘DISCOUNTED PRICE’ from the POSTED SHELF PRICE or POSTED MENU PRICE.

Example:

Shelf Price = $10.00; Merchant ADDS 3% percent as ‘NON-CASH ADJUSTMENT’ or ‘SERVICE FEE’; Price goes UP to $10.30.

($10.00 PLUS 3% percent ‘CALL IT WHATEVER YOU WANT FEE’ equals $10.30)

Then… the Customer, at the check out, decides to pay with cash, so the Merchant REMOVES the ‘FEE’, resulting in the price going BACK DOWN to the original $10.00.

No Discount from the POSTED SHELF PRICE or POSTED MENU PRICE occurred, therefore, there was NO DISCOUNT.

The Customer was simply NOT ‘Surcharged’.

NOT BEING SURCHARGED is not the same as getting a ‘Cash Discount’.

As a Small Business Owner it is important that you understand and follow the rules, as YOU run the risk of (at best) getting a fine from the credit card processor (or at worst) losing your credit card merchant privileges.

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