Card processing costs most small businesses somewhere around 2.5% to 3.5% of every card sale. More and more salons and restaurants are passing some of that on, and they mostly do it one of two ways: a surcharge on card payments, or a cash discount off a posted card price.
They sound like two descriptions of the same thing. To a customer, to the card networks and, in some states, to the law, they're not.
The two models
Surcharge. Your menu shows the base price. Customers paying by credit card pay a percentage on top at checkout. A $50 service costs $50 in cash and $51.50 on a credit card with a 3% surcharge.
Cash discount, often called dual pricing. Your menu shows the card price. Customers paying cash get a discount. The same service is listed at $51.50 and costs $50 in cash.
The customer paying by card pays the same either way. What differs is which number is the "real" price — and that difference is exactly what the rules care about.
Where surcharging is restricted
Surcharging is the more heavily regulated of the two. The details vary by location and have changed several times, so treat this as a list of things to check rather than legal advice:
- Debit cards can't be surcharged. Surcharges apply to credit cards only, which means your terminal has to tell the two apart.
- The card networks cap the surcharge, and expect you to notify your processor before you start and to disclose it clearly, both at the entrance and at the point of sale.
- Some states restrict or ban surcharging, and that list has moved in recent years.
A cash discount program generally sits more comfortably with those rules, because you're offering a discount rather than adding a fee. It still has disclosure requirements of its own, and the posted price genuinely has to be the card price.
Either way: have your processor set it up. They know the network rules, and they're who gets asked if a customer complains.
How customers feel about each
The mechanics are close. The feelings aren't.
A surcharge feels like a penalty: you were told $50 and now it's $51.50. A cash discount feels like a reward: you were told $51.50 and paying cash saves you money. Same numbers, opposite reactions.
That's why many shops choose dual pricing — but it only works when it's handled honestly. A menu where every price quietly went up 3.5% with no explanation looks like a price rise in disguise. Say what it is: "Prices shown are card prices. Pay cash and save 3.5%."
Which price to quote on the phone
This is the question most shops never decide, and it matters.
When someone calls and asks "how much is a full set?", which number do they hear — the card price or the cash price?
Our answer, and the one we built into the Sonorch POS, is always the card price. It comes down to which surprise you'd rather cause. A client quoted $45 who discovers they can pay about $43.50 in cash asks a pleasant question at the desk. A client quoted $43.50 who is charged $45 on their card has a complaint — and it lands on whoever is at the register.
Quote the price that's never lower than what they'll actually pay. Mention the cash saving if they ask, or at checkout.
The tip question
If you run a surcharge or a cash discount, decide how it treats tips. Adding a percentage to the tip portion is generally a bad idea — that money is your staff's, not your revenue — and customers notice when the percentage has been worked out on a total that includes gratuity. Check that your system calculates it on the service total only.
The processing fee on the tip itself is a separate question, covered in the card fee on a tip, and who pays it.
Before you switch
- Know your effective rate — total fees over total card volume — so you know what you're recovering. What a free salon POS actually costs shows how to work it out.
- Ask your processor which model they support in your state.
- Update every place a price is shown — menu, booking page, website — and whatever answers the phone.
- Tell your staff first, and give them one sentence to say when a customer asks.
The Sonorch POS supports dual pricing, and its phone quotes the card price. See how the register handles it.