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Data for today’s episode is provided by Mercator Advisory Group’s Report: Credit Surcharging and Cash Discounting: Approaches to Managing Processing Costs
Cash Discounting Regulation in the United States:
- As opposed to credit surcharges, cash discounts are relatively non-controversial and are legal throughout the United States.
- Card networks address the process of cash discounting within their regulations, but regulate it to a much lesser extent than credit surcharging.
- With few exceptions, states have largely remained uninvolved in regulating the practice of cash discounting.
- Wyoming is the only U.S. state with a limitation on the practice of cash discounting, prohibiting discounts in excess of 5% for the purpose of inducing payment by cash.
Mercator Advisory Group’s most recent report, Credit Surcharging and Cash Discounting: Approaches to Managing Processing Costs, examines the changing regulatory landscape for surcharging and discounting, and offers recommendations on how to effectively adopt either strategy.
Credit surcharging and cash discounting are two approaches to shifting the cost of credit processing from the merchant to the consumer. While either approach can help merchants lower operating expenses and support their bottom line, they both come with challenges and risks. Merchants should be aware of the complex regulatory environment surrounding these strategies and weigh the risk of losing customers to competitors who do not surcharge or offer discounts.
“For small merchants struggling with profitability, two main approaches exist to shift the expense of credit transactions onto consumers. In many ways, credit surcharging and cash discounting are two sides of the same coin: one charges a fee to those who choose to use a credit card, one offers a reward to those who choose cash. Still, these two approaches have experienced dramatically different treatment by state regulators and credit card networks alike,” stated the author of the report, Laura Handly, Research Analyst at Mercator Advisory Group.