What is the Cash Discount Law?
With all the buzz surrounding different marketing trends, it’s safe to say that you’ve at least seen or heard of cash discount programs by now. Data collected from Google trends shows that cash discounts have doubled in popularity over the past two years.
And while we know that cash discount programs are legal, some questions still remain: what exactly is the cash discount law, and what does it all entail? Luckily for you, we have the answers. Keep reading our blog to find out more about the legal aspects of cash discount programs.
The Durbin Amendment
When we talk about cash discount law, we first have to discuss The Durbin Amendment. This amendment states that cash discount programs are legal in all 50 states per The 2010 Dodd-Frank law. Furthermore, The Dodd-Frank law declares that US businesses are permitted to offer cash discounts to customers as an incentive to pay with cash.
Although, The Durbin Amendment and The Dodd-Frank guarantee that cash discounts are legal to implement, credit card discounts, on the other hand, are not permitted in 10 US states. It’s crucial that you understand the distinction between the two.
Cash Discount Requirements & Guidelines
Now that we’ve established the legal status of cash discount programs next, you must closely follow specific requirements and guidelines. If you aren’t careful about upholding these regulations, you and your business could face serious consequences.
Listed below are some rules you must follow to stay compliant with cash discount law:
- Ensure that you have the correct signage displayed on the door or in places visible to shoppers.
- In addition, your signage must explicitly state the credit card fee to the customer.
- Since visual reminders aren’t always enough, offer the discount verbally to guests when they’re at the checkout.
- A clear display of based cost, cash discount, and the total sale must also be on the customer’s receipt.
Cash Discounts: Not a Surcharge
Since many people often conflate the concepts of cash discounts and surcharges, this typically calls the legality of cash discount programs into question. However, we’re here to set the record straight and explain why they are not the same.
Here’s how you can tell the difference between a cash discount and a surcharge:
- Surcharging is prohibited in at least ten states, whereas cash discounts—which we’ve previously addressed—are legal in all 50 states.
- Essentially, cash discount programs are not credit card surcharges because they do not impose a fee added to credit card transactions.
The purpose of cash discounts is to help offset the cost of credit card processing fees by rewarding customers for paying with cash. Consumers will always appreciate having the option to spend less, especially if they can avoid an extra cost using their credit cards.
Cash Discount Law: How it Should be Presented
As stated earlier, the cash discount must be indicated on the receipt for the customer to reference quickly.
It should follow this outline as such: base cost, cash discount, and the total sale. Here’s an example of how it would look on a customer’s receipt:
By now, you know that a few regulations and guidelines go into effect with the cash discount law. But, as long as you abide by them, you should be all set to implement a cash discount program into your business.
Are you looking to get started on a cash discount program but don’t know where to start? We’re here to help! Contact us today and learn how we can get you set up.