How a cash discount program works, step by step
If a fee is instead added when a customer pays by credit card, it is a surcharge, which New Jersey caps at your actual processing cost [4]. You pick one regular price for each item. That regular price is the one a card customer pays. Then you offer a lower price to anyone who pays with cash. The difference is a discount, not a fee, because the customer pays less than your posted price, never more.
Gas stations have done this for years with two prices on the sign. Restaurants, auto shops and salons now do it on menus, price boards and receipts. The term "dual pricing" usually means the same thing: two prices shown side by side, with the card price as the standard one.
| How the customer pays | What they pay | What happened |
|---|---|---|
| Credit card | $20.00 | Pays the posted regular price |
| Debit card | $20.00 | Pays the posted regular price |
| Cash | $19.40 | Gets a 3% discount off the regular price |
The 3% in this example is only an illustration. You choose the discount. Unlike a credit card surcharge, a cash discount has no card network cap, but it should still be a figure you can explain to a customer who asks.
What federal law and Visa's rules say about cash discounts
Three rules work together, and all three point the same way: discounts for cash are allowed when they come off a real regular price and are shown clearly.
| Rule | What it says |
|---|---|
| Truth in Lending Act, 15 U.S.C. 1666f(a) | A card issuer "may not, by contract or otherwise, prohibit any such seller from offering a discount to a cardholder to induce the cardholder to pay by cash, check, or similar means" [2] |
| 15 U.S.C. 1666f(b) | A discount "from the regular price" for paying cash is not a finance charge if it is "offered to all prospective buyers and its availability is disclosed clearly and conspicuously" [2] |
| 15 U.S.C. 1693o-2(b)(2) | A card network may not inhibit a discount "for payment by the use of cash, checks, debit cards, or credit cards", if it does not favor one bank or network and is disclosed as federal and state law require [3] |
| Visa Core Rules 1.5.4.11 | A U.S. merchant may offer "an immediate discount from the Merchant's list, stated, or standard price" to steer a customer to another way to pay [1] |
| Visa Core Rules 1.5.5.2 | A merchant "must not add any amount over the advertised or normal price" except under the credit card surcharge rules [1] |
Read the last two rows together. Visa allows money off the standard price. It does not allow money added on top of it, unless you follow the separate surcharge rules. So the whole program turns on one question: which price is your standard price? If it is the card price, you are discounting. If it is the cash price, anything added at the card terminal is a surcharge.
A piece of history shows how long this has been settled. Before a 1981 amendment, the federal finance charge exception covered cash discounts "not in excess of 5 per centum". Congress removed that 5% limit in 1981 [2].
What New Jersey law says, and where cash discounts end
New Jersey's card fee law, P.L.2023, chapter 146, is about surcharges. It defines a surcharge as "any additional amount imposed by a seller at the time of a credit card transaction that increases a charge to a customer for the use of a credit card" [4]. A surcharge may not be "greater than the actual cost to the seller to process the credit card payment", and its amount must be disclosed before the customer is charged [4].
The statute does not mention discounts for cash. A true discount, where the card price is the posted price and cash pays less, does not increase the charge for using a card, so it does not fit that definition on its face. A program that shows the cash price as the regular price and then adds a percentage when the customer pays by credit card looks much more like the statute's surcharge, whatever the receipt calls it.
The label does not decide it
Some programs print a line such as "non-cash adjustment" or "service fee" that appears only when a card is used. If that line raises the price for paying by credit card, it may fit New Jersey's definition of a surcharge [4], and then the actual-cost cap and the sign rules apply.
A violation of the surcharge section is an unlawful practice under the state's Consumer Fraud Act [4]. Ask a New Jersey lawyer to look at your exact setup if you are unsure.
For the full statute, sign by sign, see the New Jersey credit card surcharge law page.
What customers notice, honestly
Most of your customers will pay the card price. In the Federal Reserve's 2025 Diary of Consumer Payment Choice, cash was 14% of consumer payments by number in 2024, while credit cards were 35% and debit cards 30% [6]. A cash discount rewards the minority who pay cash. Everyone else sees your posted price.
That has two sides. The good side: no card customer is charged more than the price on your menu, so there is no surprise at the register. The hard side: if you raised your posted prices to build in the discount, your regulars will notice the new prices, and debit customers pay the higher card price too. Under a credit card surcharge, debit could not be charged extra at all, because Visa's rules say debit and prepaid cards "cannot be surcharged" [5].
- The Fed found households earning under $25,000 a year and adults 55 and older rely more on cash than other groups [6]. If that is your customer base, a cash discount can feel like a thank-you.
- Visa states that it "remains opposed to surcharging" [5]. Card networks prefer that you discount cash rather than add fees to cards, which is one reason the discount route is the cleaner one.
- Say it the friendly way: "Pay cash, save 3%" reads better than "3% fee for cards", and it is also the accurate description of a real discount program.
Your dollars: set the discount from your real cost
Start with your own effective rate: total processing fees divided by card sales. If last month's statement shows $540 in fees on $18,000 of card sales, your effective rate is 3.0%. That is a sensible ceiling for your discount. Going far above it means you are pricing cash customers lower than you need to, and going far below it leaves most of the cost with you.
| Line | Per month | Per year |
|---|---|---|
| Processing fees you still pay on card sales (3.0% example) | $540.00 | $6,480 |
| Cash discount you give on $3,000 of cash sales | $90.00 | $1,080 |
| Extra revenue if posted prices rose 3% and card volume held | $540.00 | $6,480 |
The program does not make processing fees disappear. Your processor still bills you on every card sale. What changes is your price: the cost is built into the posted price, and cash customers get it back. Whether that is better than simply paying less for processing depends on your numbers, so check both before you print new menus.
Setup checklist for an honest cash discount program
- Make the card price your regular price everywhere: menus, tags, website, delivery apps and quotes.
- Show the cash price as a discount, and post it where customers see it before they order [2].
- Offer the same discount to every customer who pays cash, with no exceptions by card brand or bank [3].
- Print both the regular price and the cash discount on the receipt so the math is visible.
- Check that your terminal does not add a line on top of the posted price for credit cards. If it does, follow New Jersey's surcharge rules instead [4].
- Train staff on one sentence: "Our prices are the card prices. Cash gets a discount."
Before you change prices, it is worth checking whether your processing cost is fair to begin with. BatchOut, our own processing service, can review a statement, and the processing fee analyzer shows your effective rate in a minute. For the side-by-side with surcharging, read surcharging vs cash discount.