Dual pricing vs surcharging vs cash discount: what’s the difference and what’s allowed

Surcharge. Your menu shows normal prices. When a guest pays with a credit card, a fee is added at the end of the bill. Cash and debit card payers pay the menu price.

Cash discount. Your menu shows the card price. Guests who pay cash get money off. Nothing is added for paying by card.

Dual pricing. Your menu shows two prices for each item: cash and card. Guests pay the one that matches how they pay. Under Visa’s rules, this is a form of cash discount.

The difference matters because card-brand rules treat a surcharge very differently from a discount. A “discount” program that really works by adding a fee at the end may be treated as a surcharge.

An example restaurant’s check comes to $30.00 before any card fee. Here is what each guest pays:

The guest paying by credit card pays the same $30.90 each way. The differences are the debit card guest, what the menu shows, and which rules you must follow.

According to Visa’s merchant Q&A, a U.S. merchant that surcharges must:

• tell its processor (acquirer) at least 30 days before starting
• surcharge credit cards only, never debit or prepaid cards, even when a debit card is run as “credit”
• keep the surcharge at or below its merchant discount rate for that card, or 3%, whichever is lower
• post a notice at the entrance and at the point of sale, in store and online
• show the surcharge as a separate line on every receipt

Visa enforces these rules and can fine the processor of a merchant that surcharges wrongly. Mastercard, American Express and Discover set their own rules, so check each brand you accept. Your processor should help you set it up correctly.

Visa’s Q&A says that for a cash discount, you must show prices in one of two ways:

• only the card price for each item, or
• the card price and the cash price side by side for each item.

The card total on the final bill must add up from those listed prices. If it is reached by adding a fee for paying by card, it may look like, and be treated as, a surcharge, with all the surcharge rules above.

Card-brand rules are only half of it. In its February 2024 Q&A, Visa said it understood that Connecticut, Maine, Massachusetts, Oklahoma and Puerto Rico prohibit surcharging, and that Colorado, Minnesota, New Jersey and New York have their own requirements. Visa adds that this list may contain errors and isn’t legal advice, and state laws change.

Some states and cities also have rules on how fees and prices must be shown on menus. Before you start, check with your state attorney general’s office or consumer protection agency, your processor, and a lawyer if you are unsure.

There is no single right answer. Some questions to weigh:

• Is it allowed where you are? If your state bans surcharges, a properly run cash discount or dual pricing may still be an option. Check first.
• How will your guests feel? A fee at the end of the bill can feel like a surprise. Two prices on the menu are upfront but busier to read.
• How many pay by debit? A surcharge can’t touch debit cards, so if many guests use debit, a surcharge covers less of your fees.
• Have you cut the fee itself first? Lowering your processing cost helps every guest. See flat-rate vs interchange-plus and how to read your merchant statement.
• What does the program cost? Some cash discount programs come with their own monthly or per-sale fees. Put them in the dual pricing calculator.