True Cash Discount
Cash Discount Definition
A "cash discount" is a reduction in price offered to customers who pay with cash, check, or other non-card payment methods.
The listed price reflects the credit card or "non-cash" price, and the discount is applied at the time of payment for cash transactions. This method incentivizes cash payments and reduces processing costs for businesses.
Prices
- Prices listed are the credit card or “non-cash” price on menus, online, and advertisements.
- A discount is applied for cash payments at checkout.
Legal & Compliance
- Compliant with all federal, state, and local laws. There are currently no restrictions on discounts.
- Not applicable under MN “Junk Fees” law (HF3438)1.
- Compliant with card brand rules.
Offsetting Fees & Savings
- Your cash discount can be any amount, though most customers offset up to 4%, matched to their program/processing fees.
- Cash discount offsets card costs up to 90%. Consider how tax & tips may be handled in your system.
Did you know? You can use the Menu Minder™ tool to adjust your pricing and best leverage Cash Discount.
Disclosures: Signage, Checks, Receipts, and Online Store
- Card brands require a sign notifying customers at each door/entrance and at the point-of-sale1.
- Cash discount, shown as a percentage or amount, must be disclosed anywhere items and prices are shown, such as menus, menu boards, online ordering, and advertisements1.
- Cash discount is automatically applied in the point-of-sale by payment type.
- Encouragement for use of cash is recommended on the menu, receipt, and may be promoted online, on table tents, or in other promotions.
Receipts & Checks
- Receipts must show the discount available before payment.
- Receipts must show the discount applied after payment.
- Receipts that show two totals, both cash & credit totals, are compliant and are a convenient way to help customers visually see their savings potential.
Example receipt message: "Pay with cash and save! We offer a 3.99% cash discount".
Taxes and Tips
- Cash Discount functions like all other discounts and does not have any special Sales Tax requirements.
- Pricing adjustments for cash discounts may result in higher sales tax but are offset by corresponding expenses for payment processing costs, leaving the business's net taxable position effectively unchanged.
- Credit card tip fees2 may be applied while using cash discount.
- Tips are applied by the guest after a card payment is processed, meaning you will pay processing fees on tips.
Note: Some states allow “Credit Card Tip Fees”, where businesses charge processing costs to tipped employees. MN law as of 8/1/24 does not allow Credit Card Tip Fees2.
References
- https://www.ag.state.mn.us/Price-Transparency/PriceTransparencyLaw_FAQ.pdf
- https://www.dli.mn.gov/tips
