Is Dual Pricing Legal? Understanding Regulations Surrounding Cash Discount Programs

Are credit card processing fees eating into your bottom line? If so, you might consider a dual pricing model. In this strategy, you’ll charge a second, lower price to customers paying cash, helping you sidestep those annoying credit card processing fees. But is dual pricing legal?

Strictly speaking, dual pricing is perfectly legal. However, there may be some compliance issues that business owners will have to navigate. Here’s what you need to know before you implement a cash discount program.

Is Dual Pricing Legal?

Business owners commonly use dual pricing as part of a cash discount program. Cash customers get the benefit of a small discount, while retailers avoid costly credit card processing fees. When used for this purpose, dual pricing is completely legal throughout the United States.

The same can’t be said for surcharging. Some merchants cover the cost of credit card fees by charging a little extra for credit card purchases. But unlike dual pricing, surcharging is legal only in select states. Also, companies like Visa have additional compliance regulations that prohibit merchants from charging higher prices for credit card transactions.

Compliance Issues Surrounding Dual Pricing

Despite dual pricing being legal, there may still be compliance issues when introducing a cash discount program. Technically, the Durbin Amendment prohibits credit card companies from interfering with a company’s ability to offer discounts for cash or check payments. 

However, companies like Visa still have the ability to enforce compliance rules for dual-pricing business models. Here are some of the most relevant compliance requirements.

Merchants Must Display Two Prices

When using the dual pricing system, retailers must display both prices: one for credit card purchases and one for cash customers. 

For example, if you sell a coffee mug, you must display the credit card price as the ordinary sale price, then post a separate, lower price for cash-paying customers. If you fail to do so and add pricing additions that exceed 3%, Visa can assess fines and penalties starting at $5,000.

Surcharges Prohibited

Even in states where surcharging is legal, Visa restricts merchants from framing the discount as a surcharge since this practice has its own regulations. This does not apply to a dual pricing model, but again, it highlights the need to communicate a cash discount as opposed to charging more for credit card purchases. 

Standard PCI DSS Compliance

The above rules are in addition to the standard Payment Card Industry Data Security Standard (PCI DSS), required of any business entity that processes or transmits Visa cardholder data

Retailers who fail to abide by these standards can face fines and other penalties. This specific compliance standard is a bit technical, which is why it helps to partner with a company that offers point-of-sale (POS) solutions to help you maintain compliance. 

Finding the Right Payments Partner

Running a business is hard work. Your payment process shouldn’t be. Merchants need a POS solution that empowers them to create dual pricing models while maintaining compliance with credit card regulations. 

Simpay Select Plus allows you to do exactly that, with a POS system that displays both prices to remove any ambiguity. As a result, merchants can slash their credit card processing fees and take control of their business.

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