With payment processing costs steadily rising, more merchants are exploring surcharging and cash-discount programs to offset fees. These strategies legally pass part or all of card processing costs to customers, helping businesses preserve margins without raising base prices. In 2024, about 28% of U.S. small and mid-sized merchants have implemented one of these models — up from just 12% in 2021 (The Strawhecker Group). For Nevada businesses, where competition and tourism increase card transaction volume, understanding these tools is essential to maintaining a low processing fee in Nevada without compromising service quality. Before adopting either program, it’s crucial to know the legal requirements, best practices, and how to maintain customer trust.

Understanding the Difference

Surcharging adds a small fee, usually up to 3%, to credit card transactions to cover processing costs. It applies only to credit cards, never to debit or prepaid cards. Cash-discounting, on the other hand, offers a price reduction to customers who pay with cash or other low-cost payment methods. Instead of adding a fee, you post a “standard price” that includes card fees and offer a lower price for cash payments. For example: Card price: $100; Cash price: $97 (3% discount). Both methods achieve the same goal — shifting processing costs away from the business — but they differ in presentation, compliance, and customer perception.

Legal Landscape (U.S. 2024)

Surcharging is legal in most U.S. states, including Nevada, as of 2024. Only Connecticut and Massachusetts still prohibit it. However, merchants must follow strict compliance requirements from Visa, Mastercard, and state laws. Disclosure is mandatory: merchants must display clear signage at checkout (both in-store and online) informing customers about the surcharge. The fee must never exceed the actual processing cost or 3%, whichever is lower. Merchants must also register with Visa and Mastercard at least 30 days before implementing surcharges and notify their acquiring bank. Additionally, debit card transactions cannot be surcharged, even if processed as “credit.” Cash-discounting faces fewer legal constraints because it’s framed as a discount, not a fee, but it must be executed properly to remain compliant.

The Business Case for Passing on Fees

Payment acceptance costs have increased roughly 25% in the past five years, driven by premium rewards cards and rising interchange rates. According to the Nilson Report (2024), average U.S. merchants now pay between 2.25% and 2.75% per transaction. For a small business processing $500,000 annually, that equals $11,000–$13,000 in fees. Implementing a compliant surcharge or cash-discount program can recover a significant portion of these expenses, helping local Nevada merchants maintain a low processing fee and improve profit margins.

Implementation Best Practices

Choose a compliant program provider that supports automatic registration, signage, and fee calculation. Trusted providers include CardX, Payroc, and Stax, which handle most compliance requirements. Keep the fee transparent by disclosing it before finalizing each transaction. Hidden or unexpected surcharges can damage trust and increase chargebacks. Always cap the surcharge at 3% or your actual processing cost, whichever is lower, in accordance with Visa’s 2024 rules. Use accurate labeling at checkout — display the charge as “Credit Card Surcharge,” not “Service Fee.” This ensures transparency and network compliance. Train your staff to explain the program clearly: “We offer a small card fee, but you can save by paying cash.” Regularly review customer feedback and adjust if resistance increases.

Cash-Discount Advantages

Cash-discount programs often work better for smaller retailers, fuel stations, and service providers because customers view discounts more positively than fees. According to a 2023 National Retail Federation survey, 63% of consumers prefer clear cash discounts over card surcharges, especially when framed as savings. Businesses that use cash-discount programs typically recover 70–90% of processing fees, depending on their transaction volume and setup. For Nevada merchants aiming to sustain a low processing fee, this approach offers a customer-friendly way to cut costs while rewarding cash buyers.

Pitfalls to Avoid

Avoid applying surcharges to debit cards — it’s strictly prohibited. Never fail to register with card networks or exceed the 3% fee cap. Always update your POS and receipts to reflect compliant labeling. Misleading customers or failing to display signage can lead to processor penalties or even account termination. Keeping your implementation compliant is key to protecting both revenue and reputation.

Conclusion

Surcharging and cash-discount programs are powerful tools for reclaiming profit margins amid rising card fees. When implemented properly, they help businesses transform processing costs into a manageable, strategic expense. The key to success lies in transparency, compliance, and consistent communication. For Nevada merchants focused on maintaining a low processing fee, these programs can reduce total payment costs from an average of 2.5% to nearly zero — without sacrificing customer trust. Done right, they turn payment acceptance from a cost burden into a competitive advantage.

Ready to Optimize Your Payments?

We provide secure, affordable payment solutions tailored to your business. With fair rates and expert support, we help you grow. Your wish for better payments? Granted!
Contact: 📞 Julio Retana, Owner ✉️ julio@paymentgenie.org 📱 775-830-7639