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Convenience Fee vs. Cash Discounting

By June 26, 2019 April 24th, 2020 No Comments

What’s the difference?

Continuing in our discussion of surcharging, a distinction between cash discounting and convenience fees needs to be made. Both have their pros and cons, but they are two different processes. Cash discounting focuses more on rewarding patrons for using cash. On the other hand, a convenience fee simply adds a fee when the use of a credit card occurs. The two share the same positive of offsetting merchant processing fees.

Cash Discounting

Cash discounting is an incentive for customers to use cash and forgo using their credit card. However, cash discounting is not a surcharge. Cash discounting requires that the customer is aware of both the price of the item if using a card and if using cash. It is not acceptable to discount the item at the register if the customer pays with cash. It is of the utmost importance to inform your customer of the cash discount, so they are aware of what is transpiring during their transaction.

Convenience Fee

The trend of merchants adding a convenience fee seems to be gaining momentum. The major problem with convenience fees is that use of them depends on state regulations and are subject to change. Different states have different laws regarding convenience fees. Convenience fees are often misused in an effort of the merchant to compensate processing fees. Convenience fees are a flat fee that is charged when a credit card is used. If cash or a debit card is used, there is no flat fee charged. Also, customers have to be made aware of the convenience fee.

Furthermore, Visa has certain rules regarding the appropriate use of them. For example, universities and government agencies are permitted to charge a convenience fee. Another instance where convenience fees are acceptable is if you call to place an order when the standard method of payment is to visit a store or facility in-person and pay. Because another payment channel is utilized, the convenience fee is permitted.

Why Researching is Important

Like we said above, these regulations are state dependent and are subject to change. It is important to research the laws for your area and updated regulations to ensure complete compliance. If a merchant is not compliant, fines are subject to occur if the issue is not corrected.