What Is Dual Pricing, and How Can It Help My Overhead Costs?

How much are you currently paying in credit card processing fees? According to the National Retail Federation, credit card swipe fees have risen by a staggering 20% between 2022 and 2023. Can a dual pricing model help your business offset these costs? Here’s everything you need to know about using dual pricing to offer a cash discount program for your customers.

What Is Dual Pricing?

Dual pricing is a strategy to avoid or offset credit card processing fees by offering a discounted price for cash-paying customers. This is sometimes called a “cash discount” program — you offer a lower price to incentivize customers to pay in cash.

How Does Dual Pricing Work?

In a dual pricing system, you’ll advertise two different prices. Per Visa’s regulations, merchants are required to make the credit card price the official sale price and advertise a separate price for customers paying in cash. 

For example, you might charge $15 for a charging cable but offer the same item for $14.50 for customers paying cash. The goal is to encourage more cash purchases and avoid credit card processing fees altogether.

Dual Pricing vs. Surcharging

Both dual pricing and surcharging have the same goal: to offset or avoid credit card processing fees. However, surcharging is the act of attaching an additional charge to each credit card purchase. The dual pricing model doesn’t work that way but simply offers a discount for cash purchases.

Additionally, surcharging is not legal in every U.S. state, but dual pricing is. And even in states that allow surcharging, companies like Visa prohibit the use of surcharges.

Advantages of Dual Pricing

There are many reasons why retailers love the dual pricing model. Here are some of the advantages of using dual pricing to offer cash discounts:

  • Customers may love the chance for a discount
  • Cash payments increase your company’s cash flow
  • Cash discounts are legal in every state 
  • Cash discounts build customer loyalty

Granted, some customers who pay with credit cards may feel frustrated by the two-tiered pricing system. But if you clearly communicate your dual pricing approach, you may build goodwill with customers eager to save money by paying directly in cash.

Legal and Compliance Issues 

Unlike surcharges, dual pricing is legal in all 50 states. Additionally, the Durbin Amendment protects the rights of business owners to institute a cash discount program. That said, credit card companies can set compliance regulations and penalties for merchants who violate them. Visa, in particular, requires that merchants:

  • Advertise both prices on each item
  • Make the credit card price the “official” sale price
  • Comply with the Payment Card Industry Data Security Standard (PCI DSS)

Additionally, Visa prohibits merchants from framing the discount as a surcharge for credit card payments, even in states where surcharging is legal. Basically, Visa allows merchants to offer a discount to cash-paying customers but prohibits merchants from attaching additional fees for credit card payments.

How to Stay Compliant

Staying compliant with the above requirements isn’t hard — with the right help. That’s why companies like Simpay offer merchant solutions that help you develop dual pricing systems and cash discount programs. The Simpay Select Plus system is fully compliant and makes it easy to implement both surcharges and dual pricing strategies.

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