Payments & Fintech Law
Cash Discounting and Dual Pricing
Making the Law Simpler
Understanding Cash Discounting and Dual Pricing
If you’re doing business of any kind in the payments and FinTech industries in the United States, it’s essential to understand the legalities of cash discounting and dual pricing.
Technology is evolving at a rapid pace and businesses have to compete to remain current with chip technology, mobile payments, near field communication (NFC) technologies, and more.
A reoccurring topic at the forefront of the Payments and FinTech industries is Cash Discounting and how to properly implement such a program in compliance with applicable laws and rules.
What is Cash Discounting?
Cash discounting refers to a practice where merchants offer customers a discount for paying with cash instead of using alternative payment methods such as credit cards or mobile payments. This practice aims to incentivize cash transactions by reducing the cost for both the merchant and the customer.
What is Dual Pricing?
Dual pricing is one legally compliant way to implement a cash discount program. Dual pricing involves displaying two different prices for a product or service depending on whether the customer pays with cash or uses an alternative payment method. The purpose behind dual pricing is to cover the additional costs associated with processing non-cash transactions, such as transaction fees imposed by financial institutions.
Both cash discounting and dual pricing have gained prominence in recent years due to advancements in technology and mobile payments. However, it’s crucial for businesses operating in this space to navigate these practices within legal boundaries.
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Cash Discounting Compliance
In the ever-evolving landscape of technology and mobile payments, cash discounting has emerged as a legal strategy for businesses to navigate the complexities of payment processing.
By offering discounts for cash transactions, merchants can offset the costs typically incurred through credit card processing fees.
In the United States, it’s legal in all 50 states for business owners to offer a true cash discount program to their customers; however, business owners must ensure that their cash discount program qualifies as a cash discount and is not inadvertently a “disguised” surcharge.
To ensure that a cash discount program is compliant, among other things, it’s imperative that the regular price displayed is the higher credit card price.
Transparency is key to compliance. It should be clear to the customer at every stage of their buying journey what the regular price is and the discount they will receive if they elect to pay with cash. The customer should never go to check-out and see any additional fee or charge for the use of a credit card since this will be deemed a surcharge and incorrect, and a non-compliant, cash discount program.
Dual Pricing Compliance
Business owners must ensure that their cash discount program qualifies as a cash discount and is not inadvertently a “disguised” surcharge.
Arguably the most compliant way to implement a cash discount program is through a dual pricing model.
A dual pricing model is exactly what it sounds like – a model in which the business owner posts two prices (i.e. the regular price and the discounted price that’s applied if the customer elects to pay with cash).
Displaying the two different prices side-by-side gives the customer an opportunity to compare the prices and decide, before they check out, whether they want to partake in the discount by choosing to pay with cash.
The dual prices should be displayed anywhere prices are posted or listed for customers, including but not limited to POS displays, price tags, shelf labels, physical menus or pricing catalogs, customer facing digital displays or menus, customer receipts, and the like.
Have Questions?
If you have any questions about cash discounting or dual pricing, you should speak to an experienced payments and FinTech law attorney in your area, such as Charles Bishota and Nicole Pirog of Bishota Law.
Our experienced attorneys can help you understand how cash discounting and dual pricing work and can help you protect your business. Contact Bishota Law today to schedule a consultation.
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