Merchants have long used “discounting” as a tool to boost sales and build customer loyalty. In today’s evolving payment landscape, discounts based on the type of payment tender, also known as cash discounting, have emerged as a more recent and increasingly popular strategy.
When people think about receiving a discount for using a particular payment method, cash discounting is often the first thing that comes to mind. Traditionally, this involves offering a lower price to customers who pay with cash rather than credit cards. This practice allows merchants to avoid paying credit card processing fees, which can range from 1.5% to 3.5% per transaction [1], depending on the card network and the type of card used.
However, as cash becomes less common in day-to-day transactions, the relevance of traditional cash discounting is diminishing. Cash accounted for approximately 30% of all transactions in 2017, and that number is projected to drop to just 15% in 2025 [2]. This shift has pushed businesses to reevaluate the role of tender-based discounts and explore more modern alternatives.
Today, many merchants are extending these discounts beyond cash to other low-cost payment options, such as PIN-based debit cards or Pay by Bank solutions such as Automated Clearing House (ACH) payments. These alternatives offer a middle ground—providing consumers with convenience while still allowing merchants to avoid higher processing fees. ACH payments, for instance, are especially appealing in industries with high transaction values, such as utilities, tuition services, or subscription-based businesses, due to their low cost and reliability.
This evolving discount strategy is visible across multiple industries. Mobile phone service providers and other merchants with recurring billing may offer a small discount to customers who pay using bank transfers or debit cards instead of credit cards. Similarly, big-box retailers and even some restaurants are now advertising a “cash price” alongside a “card price,” effectively encouraging consumers to consider their payment options more carefully.
Some merchants also argue that discounting for cash and other cash-like forms of payment is easy for consumers to understand and accept. In contrast, surcharging (adding an extra fee to card-based transactions) could be seen as a penalty and could be met with resistance from a customer. For example, a customer may appreciate saving 2% for using cash but may feel frustrated if charged an additional 2% for using a credit card.
Here’s a simplified breakdown of how surcharging and cash discounting apply to different payment types:
| Payment Type | Surcharging | Cash Discounting |
| Credit Card | ✔️ Yes | ❌ No |
| Debit Card (Processed as Credit) | ✔️ Yes | ❌ No |
| Debit Card (PIN-based) | ❌ No | ✔️ Yes |
| Cash | ❌ No | ✔️ Yes |
| Check | ❌ No | ✔️ Yes |
| ACH Payments | ❌ No | ✔️ Yes |
Another advantage for merchants is that, unlike surcharging, cash discounting is permitted in all 50 U.S. states. This makes it a more accessible and legally sound strategy for businesses of all sizes looking to take greater control of their payment processing costs.
In an era of digital wallets and tap-to-pay convenience, the way consumers pay is evolving. Businesses that adapt by aligning their pricing strategies with payment trends can foster stronger customer relationships, lower their expenses, and remain competitive in a rapidly changing financial ecosystem.
By Payments Roundup Staff
[1] – Average Cost Of Credit Card Processing Fees | Bankrate
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