What Is a Surcharge?

A surcharge is a fee that vendors can add onto credit card transactions to make up the cost they’re charged by the credit card association. Debit cards cannot be surcharged. Each card association has its own guidelines for applying surcharges.

 A surcharge is a fee that vendors can add onto credit card transactions to make up the cost they’re charged by the credit card association.

A card association is the network of banks that process payment cards of a specific brand. These are brands you know like Visa, MasterCard, Citi, and American Express. Many of these associations will co-brand their cards with other banks, airlines, or hotels.

In most cases, card associations cap their surcharges up to 3% for the transaction value. Many merchants, however, tend to charge a flat fee for their surcharge whether it falls under that threshold or not. 

What is a Cash Discount?

If you live in a state where surcharging is illegal or you don’t want to jump through the hoops to set up your business for surcharges, offering a cash discount might be a prudent route for your business. In this case, the price of the item is increased, to help offset the processing.

A cash discount is just what it sounds like; you offer a discount to customers who pay with cash or check. The idea here is that at the time of sale, when a customer pays with cash, they receive a discount off the regular sales price. When a customer pays via a payment type other than cash at the time of sale, they do not receive any discount for the transaction.