Which is Best Surcharge Program or a Cash Discount Program?

You may notice when you go to pay your utility bill or tax bill that there is a surcharge to use your credit card for payment. For years we have seen these fees applied by government entities. Today its more mainstream and retailers and service providers are now utilizing a surcharge program to pass the fee along to the cardholder.

With a surcharge program there are rules that must be adhered to in order to do this compliantly with the card brands. Your credit card processor must register you with each card brand as passing a surcharge along to the cardholder. You the business must give customers a 30 days notice to implementing a surcharge program. In addition, the surcharge fee must be posted within the establishment, on the website and near the cash register. The surcharge fee must be displayed and separated on the cardholder’s receipt. This program is not offered in the following states California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas.

What if surcharging is not allowed in my State?

If you are in a state that does not allow surcharging than a cash discount program will work best for you. A cash discount program allows you the business to offer a discount for cash purchases and to pass a fee along on credit card purchases. You may have seen this in practice at gas stations today where they list a cash price for gas and a credit card price for gas. The key is to find a processor who can offer you technology to do this compliantly.

What to look for in a cash discount program

When looking for a processor for cash discounting it is important to have a compliant program. See some tips below on how to spot a compliant program.

  • Customer Signage- Signs within your establishment notifying customers of this policy. We recommend posting 3 signs one at the door, one within the establishment and one by the cash register. If you have a website it is also recommended to post this policy.
  • 30 day notice to customers- 30 days prior to implementing the cash discount program in your business be sure to post signs in your establishment and notify customers that on a given date this new program will go into place. This allows customers to make arrangements to use cash if they do not want to pay the fee.
  • The technology such as credit card terminal, mobile app or Point of Sale System much break out the fee as a separate line item on the receipt. If you are adding the fee yourself and it is not displayed on the customers receipt this is not considered compliant. Make sure your processor has this broken out on the bottom of the customer’s receipt. This is very transparent to the cardholder and in turn reduces any misunderstandings or chargebacks.
  • The fee passed along to the cardholder cannot exceed 4% of the sale.

Which is best a Surcharge Program or a Cash Discount Program?

Depending on what state your business is in may be the best way to evaluate this. If you are in one of the states that prohibits surcharging than you will want to institute a cash discount program. The payment industry has been putting time and resources into the cash discount program for the last several years. You may find that the technology available to you may be better in a cash discount program. I would suggest using technology and your needs as a business to help you make this decision. Processors are building iOS and android apps incorporating the cash discount program. They are developing terminals and point of sale software’s to accommodate the influx of customers demanding this program. There isn’t a lot of development going on regarding surcharging. Where surcharging was designed to initially allow government entities and municipalities to pass this fee along the technology development was left to these entities. Let your business needs decide what program works best for you. The truth is transitioning your credit card processing fees is a huge savings to businesses.

What do I charge my customer to use a credit card?

Turing an expense in your business into a profit can be a game changer. Cash discount programs allows you the business to pay zero percent processing fees. Depending on your processors program can reduce your fees from 95-100%. Most processors should only charge a monthly fee this should cover PCI fees, statement fee and equipment fee. The fee you pass along to your customer is covering all the processing fees. The fee passed along is anywhere up to 4%. For merchants who have a small average ticket you may decide to pass along a set fee of $.049. For businesses with average tickets over $20.00 it is recommended to charge 3.95%. This rate is generally determined by your credit card processor.  Be sure to ask how their program works and what options are available. You be the final decision maker of what fee will work best for your customers.

Steps To Lower Credit Card Processing Fees

All business owners or managers look for ways to reduce the cost of processing credit cards. In today’s climate every penny counts to the bottom line. More than ever small businesses are cutting back on expenses. Lets take a look at what pricing programs are available and the pros and cons of each. Were going to give you Steps to finding the best pricing program and reduce your cost of processing.

Step1 : 

The first step in reducing your cost as a business owner is to find a reliable processor and an agent you can communicate with. The representation of a processor is crucial in ensuring you have a voice at your processor.

Step 2 : 

The second step is to know what pricing options are available you. There are many ways to setup a merchant accounts pricing structure.

Here are the 3 most preferred ways.

Traditional Pricing:


Pass through interchange plus is the most cost effective if you the merchant and absorbing the processing fees. In this pricing scenario you, the business pays the interchange cost plus a markup. This is normally displayed transparently on the monthly statement. This is great for merchants with high monthly sales.  The benefit to getting interchange cost is that you get the benefit of the low-cost interchange rates such as signature debit and EMV chip transactions.


The only con to this pricing program is estimating your monthly costs and reading the merchant statement. These statements show the interchange qualifications and the mark up. Some business owners find reconciling to be a challenge.

Flat Rate:


This pricing program became popular with companies like square. They give you a flat rate for swiping a card and a flat rate for keying cards in. This program is easy to navigate your costs.

Cons– Although knowing you have two rates helps estimate the cost of your monthly processing it does cost you the business more. Your lowest rate charged is the swiped rate generally at 2.75% or more. That means the least you will be billed is this. On interchange plus program you get the benefit of cards like signature debit cards that qualify at .05% which can be a huge savings.

Cash Discount:

This is the most cost effective for the business. This is where the business passes the processing fees to their customers the cardholder. They price all goods and services at a discounted cash price. They post notifications within their establishment and by the cash register that states that all goods and services are priced at a cash price. If they chose to use a credit card than a service fee is applied. Generally the only fee the business pays on this program is a monthly fee.  This can bring savings of over 95% to the business.  It is a huge savings

Pros– This program saves most businesses at least 95% of processing fees. The only fee normally paid is a monthly fee which covers any technology and statement fees.  Most consumers are accustomed to paying a fee when they pay their utilities, taxes, booking concert tickets and now retailers. This program is most successful when the business posts a notification 30 days prior to implementing it. This gives customers notice to bring cash if they do not want to pay the fee.

Cons- The only con is how customers receive the program. Most businesses worry about upsetting their customers by passing this fee along.  The truth is most customers are open to helping small businesses stay in business. The program is successful when a 30-day notice is given to the customers and signage is present in the establishment. We found that only 3% of businesses who try this program switch back to the traditional program. 97% of businesses find this to be a game changer. They use the money saved from processing for employees, new equipment, and more products.

All businesses have their own set of needs for technology and pricing be sure to find a processor you can work with transparently. Having great representation in your sales agent is key to fostering a good relationship with your processor. What ever program mentioned above works for your business make sure your processor has these options and is willing to give you the program you want.

Why Choosing a Cash Discount Program Can Save Your Business

Cash Discount programs have been a saving grace for small businesses post pandemic. Business owners are looking for ways to cut costs, keep employees on payroll, increase inventory and grow their bottom line. One of the most effective ways to cut costs is to institute a cash discount program. Most likely your business accepts credit cards and there is an expense that goes along with that. In the past business owners absorbed these costs or built them into the cost of their services and goods. Today coming out of the pandemic card holders are more supportive of small businesses and understand that there is a cost to their convenience of using a credit card. Business owners are now transitioning this cost onto their customers. The motivation behind this is to keep their prices low and competitive to the big brand retailers.

As cardholder you may notice a fee is added to your total to pay utility payments, water bill payments, cell phone bill payments, property taxes, concert tickets and many more. We notice that when we send money or make purchases on popular platforms like Paypal and Venmo a fee is added. This is becoming the norm more and more. Cardholders are becoming more willing to pay extra for the convenience of using their credit card to a make purchases.

Why Choose a Cash Discount Program?

  • Using a credit card is considered a convenience, and like most conveniences, it comes at a cost.  Small fees are charged to the merchant for every processed credit card transaction.
  • These small fees add up fast and can result in a huge loss of profit for your business.  You’re losing hundreds, if not thousands, of dollars each month in credit card processing fees.
  • But don’t worry! Some processing companies, like ibuxx, understand the burden of losing a vast amount of money to credit card processing fees and offer a program to transition these fees.
  • Reduce your processing fees by at least 95%
  • Select a program that works for your business!

As a result of their efforts, business owners just like you can eliminate their credit card processing fees by adopting a cash discount program, otherwise known as zero fee processing

What do you need to know about accepting credit cards in your business?

There are a lot of moving pieces when beginning a business. There is a lot to think about, from getting your physical business ready to choosing providers. All business owners must eventually question themselves, “How do you want to be paid for your goods and services?” Cash is the most cost-effective method of payment. When it comes to your consumers and payment convenience, many businesses choose to accept credit cards.

Here are the things you need to know about accepting credit cards in your business

Reliability– First you need to find a reliable credit card processor. Many new businesses decide to use an aggregator such as Square to get started. The reason they choose a company like Square is because its easy to get signed up and start accepting cards. Businesses run into service issues with Square if they need any type of customer service or hand holding. Squares support infrastructure is based mostly on chat or email. In order to get to a live person, you have to sit on hold and get transferred around. Most new business owners do not like this type of support structure. Often when opening a new business, you need some hand holding to get the process down of accepting cards, reconciling deposits and fees.  When considering the reliability of a processor you can’t just consider the technology you also must consider the customer service. You want to find a processor or sales agent that can take the time to get you accustomed with accept credit cards.

Pricing– Best bang for your buck. When considering a program that best fits your business needs one must consider cost. Typically, the cost ranges from 2.50% to 3.95% depending on the type of pricing structure you choose.

There are 3 main pricing programs available by most processors.

  • Interchange Pass Through Plus- This pricing plan charges the cost of interchange from the card brands plus a markup. The markup should be disclosed on the paperwork from your processor. It is best to try to keep the mark up below .75%. Any markup above this is not a good deal. The best way to gage your rate each month is to take your total fees and divide that into your total sales volume to get the effective rate. Any effective rate over 4% is too high. This is when you need to ask for a rate decrease or start shopping.
  • Tiered Rate– This rate structure is used by companies like Square. They give you a rate for swiped cards and a rate for keyed in cards. This pricing program helps you predict what your fees will be. However, it is not the cheapest way to process. If you have monthly sales volume over $20,000 this program is costing you more than it should.
  • Cash Discount– This pricing program has become extremely popular. This program is different because the business does not pay the processing fee. This ultimately is a zero-processing fee program. All the fees are passed along to the cardholder. The business prices all its good and services as a cash discounted price. If a customer chooses to use a credit card the fee is applied at check out. There are some rules to this program. The business must notify customers of this fee and it must be disclosed on the customers’ receipt. This program by far is the least expensive. Normally the business pays a small monthly fee and 95% or more of the processing fees are passed along to the cardholder

Contract- The contract with a credit card processor can be a complicated document to read. Here is some tips on what to watch out for.

  • Term of contract– This can vary from 2-3 years.
  • Early Termination Fee– Check to see if there is a fee for Early Termination. This can range from $200-$500 depending on how the contract is written. Ask your processor to remove this fee so you are not penalized if you leave before your contract expires.
  • Reserve Language– Its always good to read the reserve language in a merchant contract. A reserve is put in place for high-risk merchants or merchants who get a lot of chargebacks. This is considered risky by most processors so if you have a business model that gets cardholders charging back their purchases be sure to read this language.
  • Ancillary Fees- A merchant contract has several ancillary fees, that may be charged on a monthly basis or per occurrence. Such as returned ach fee, chargeback fee, retrieval fee, annual fee, pci compliance fee, address verification fee. Be sure to review these fees and ask your sales agent when they would be billed.

Choosing a credit card processor can be difficult, and we typically opt for the cheapest option over the finest program. We have a lot more options now than we did just a few years ago. We now have the option to charge the cardholder for the processing fees. Businesses are increasingly opting for a cash discount program as the cost of goods rises and workers become harder to come by. This initiative promotes the use of cash as the most cost-effective mode of payment. Which ever option you choose we hope this information is helpful is finding the right credit card processor.

What to look for in a merchant processor

There are many factors in determining what processor is the best match for a given business. After working in the merchant processing industry for 20 years, I believe I have a good perspective on what a merchant should look for. I have worked with thousands of businesses over my 20 year tenure in the credit card processing/banking industry. My approach has always been to educate my sales team to know their business in order to effectively evaluate a business’s needs. If you know your business, you will be able to evaluate the specific needs from a financial standpoint in order to customize the program.  Someone who does not work with merchant processing on a daily basis, will find guidance helpful to ensure a cost-effective program for their business needs.

Know your contract:

By this, I mean know the terms of the contract

Is there a cancellation policy or an early termination fee?  Is it a three-year contract, five-year contract or seven year contract, etc.? Can they increase your pricing at any given moment?  When can they raise the pricing?  How does that affect your rate? How does that affect your bottom line? Is there a monthly minimum? A monthly minimum indicates the minimum amount in fees that a processor will collect in any given month. If actual fees resulting from processing activity don’t meet or exceed the minimum amount, the processor will charge however much is necessary to meet the minimum. The tricky part of monthly minimums is how the processor determines which fees count toward the minimum and which do not.

Know your rate:

what pricing plan are they proposing to you? Is it an interchange plus pricing plan, three or 6-tier pricing plan, flat rate, or interchange with a bill back? How do you determine which pricing plan structure meets your business needs?

Here are the most popular rate plans available

  • Flat Rate– This is where the merchant is billed a flat rate for processing. Most providers now break it out into a swiped rate and a key entered rate.
  • Interchange Pass Through Plus– This is where the merchant is billed the card brands interchange and association fees at pass through cost. There is a markup added. Normally this markup ranges from .10% to 1.50% depending on your type of business and processing volume.
  • Cash Discount– This program passes the processing cost to the cardholder. The fee is disclosed in the business and added to the total cost of goods and services. This program is considered a zero-processing fee program because the business does not pay the fees.

Should you sacrifice service for price? 

Service versus price? A question many business owners ask themselves. In some cases, if your buying equipment or goods service may not be a primary concern. However, when a service impacts your businesses cash flow, service is a primary concern. Be sure to ask questions of your sales agent. Know how to get the help when you need it.  Service is just as important as the bottom-line price you’re getting for services. From a service standpoint the smaller reseller Independent Sales Organizations seem to have a better service model. The primary reason is because they have fewer customers and support is their primary concern.

If you choose a zero-processing fee program such as a cash discount program service is a primary concern to any new program. Be sure to check out your prospective provider on BBB ratings.  If a processor is not a member and you cannot find any ratings be cautious. Having a good service provider is a game changer when starting a new program like cash discount.

This article is meant to assist business owners in finding the right program that fits their business needs for the merchant processor. Take the time to evaluate who you choose to process your credit cards with. Too often small businesses get stuck in contracts and paying fees they do not want to. Many of these troubles can be avoided by doing some homework on the front end. Regardless of what program you chose for your business we hope this information is useful in finding the right one for you.

Credit Card Processors Zero Processing Fees Program

What is Zero Processing Fees program that proclaims no processing fees to accept credit cards in your business? You may remember seeing this practice at gas stations across the country. Where they list a gas price for cash and for credit cards. This practice has been in place for decades. The current economic climate has pushed business owners into finding ways to reduce their costs and overheads. Today cardholders understand there is a cost to accepting credit cards. They are accustomed to fees when using popular apps such as Venmo, Cash App and Pay Pal. When a small business decides to go with a program that passes the fee along to the cardholder more and more customers understand.

Is this program right for my business?

The only reason a program like this is not successful is because the customer’s object. This program can be implemented successfully. Always give your customers a 30 days’ notice before implementing the program. Put up signage that explains when the program will go in place and what the fee is. This gives customers the ability to decide if they want to pay the fee or bring cash next time they shop. From a financial standpoint saving 95% or more in processing fees can be a big deal to a business. Many businesses are turning these saved fees into profit by increasing inventory and staff. It proves to be a win win financially for most businesses.

What to look for in a Cash Discount Program

  • First find a reputable company. Check them out of BBB. If they pass the service rating test evaluate the program parameters.
  • Determine what they will be charging your customers? This should not exceed 4% as the card brands have a limit set.
  • Technology- What type of technology are they offering? Be sure they have the type of technology you need to accept payments. Their product offering should include mobile app for use with android and ios, Point of Sale System and stand-alone terminals. Many processors will place equipment at no cost or include it in their monthly fee.
  • Zero Processing Fees– The only fee you should pay in this type program is a monthly fee, pci compliance fee and equipment fees. This fee should be less than 5% of what you were paying in the traditional program. This program was designed to bring savings. Do the math and be sure the program you’re signing up with does just that.

What are the nuts and bolts of the program?

A cash discount program is where a business essentially prices all their goods and services as cash. This is the lowest price that the business is willing to sell a product or service for. The business imposes a service fee for all credit card transactions. This fee should be visible on the receipt and there should be notices at the front of entrance and with in the establishment advising of this service fee. There are sophisticated POS systems that will list out the cash price and credit card price for all products if your business has a need for a POS system.  This program is meant to reduce the businesses cost by at least 95%. Be sure to do the math and verify the fees your responsible for. This program is increasingly gaining momentum and one that will be around for some time. At some point you may find that you want to try this in your business. We encourage you to find a trusted provider and to be sure to notify your customers before pass the fees along.