The industry and what we consider “cash discounting” is changing. As regulations from the card brands begin to mount, many merchant processors are looking to offer a variety of compliant fee-based programs for their merchants. As BOLD continues to uncover details, the direction of the card brands is becoming apparent. To understand where we might be headed, it is important to understand where it all began.

History of Cash Discounting

“Cash Discounting” found its niche in liquor stores and gas stations in the early 2000s as business owners looked for cost-cutting measures. Before card brand regulations in 2011, companies were charging card paying customers excessive fees in order to cover the cost of merchant processing, and then some. However, since the introduction of the Durbin Amendment Act, rules were put in place to protect card-paying customers and business owners while opening the doors for businesses to run a “compliant” Cash Discounting program. 

In § 920 Section 4 of the Durbin Amendment (Reasonable Fees and Rules for Payment Card Transactions), the term “discount” is defined and makes abundantly clear that any program adding a fee to the regular price is not a “cash discount” as defined by the Durbin Amendment.  This is the rationale for using terms such as “non-cash adjustment” rather than “cash discount” and is a large reason as to why we are in the current situation.

Current State of Cash Discounting

In terms of Cash Discounting, perhaps the biggest takeaway from the Durbin Amendment is that business owners MUST treat their program as a DISCOUNT on their regular price rather than a FEE. Many merchants began promoting their regular pricing to include a non-cash adjustment allowing customers who pay with cash to avoid the NCA (non-cash adjustment). “Cash Discounting” programs were quickly branded as in-kind incentives and or non-cash adjustments with this pricing model in place.

However, card brands have recently faced difficulties regulating merchants running these types of programs. Cardholder complaints have drastically increased over excessive and inconspicuous fees as merchants implemented unregulated programs which were NOT forthcoming in the difference in pricing (violating  § 920 Section 3).

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Possible Future of Cash Discounting/Fee-Based Programs

The Card Brands (Visa, Mastercard, Amex, Discover) regulation on terminology and how the program is presented has ignited software vendors and merchant processors to make changes to their software and practices in order to adopt the current updates. 

Terminologies such as “in-kind incentive” and  “non-cash adjustment” are being phased out and replaced with a “Dual-Pricing” structure. As of the day this blog was originally posted, Dual Pricing is the safest method of running a fee-based program without the need to register with the card brands. Dual Pricing will vary from state to state based on state and local laws but here are some of the high level bullet points of this type of program :

• • The credit card receipt will no longer contain a separate line item informing the customer that they will be charged for using a credit card (i.e.- non-cash adjustment). 
  • Cash pricing and credit card pricing will more than likely need to be displayed separately on menus, shelves, and promotions.
  • All cardholders must be notified of the charges of the final total BEFORE running the credit card. (more than likely the terminal/POS system will need to be able to distinguish and provide a cash receipt and a credit card receipt)
  • Signage will still need to be highly visible throughout the establishment informing the card holders of the varying prices.

BOLD will continue to monitor and update this blog as changes arise. In the meantime, should you have questions, please contact us by filling out the form below or emailing us at info@boldpay.io.

Disclaimer- The information provided does not, and is not intended to, constitute legal advice; instead, all information, content, and materials are for general informational purposes only.

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