Is Dual Pricing Legal? Understanding Dual Pricing 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?

Dual pricing is totally legal, but there are a few compliance hurdles you might need to jump over. Here's what you should know before rolling out a cash discount program.

Is Dual Pricing Legal?

Many business owners love using dual pricing. It’s a win-win: cash customers enjoy a nice little discount, and retailers can dodge those pesky credit card processing fees. Plus, dual pricing is perfectly legal across the United States.

However, surcharging is a different story. Some merchants try to offset credit card fees by adding a bit extra to credit card purchases, but unlike dual pricing, surcharging is only legal in certain states. On top of that, companies like Visa have specific rules that prevent merchants from hiking up prices for credit card transactions.

Compliance Issues Surrounding Dual Pricing

Even though dual pricing is perfectly legal, you might run into a few compliance bumps when setting up the program. The Durbin Amendment actually protects your right to offer discounts for cash or check payments without interference from credit card companies. However, companies like Visa can still enforce their own compliance rules for dual-pricing models. Here are some key compliance points to keep in mind.

Merchants Must Display Two Prices

When you're using the dual pricing system, it's important to show both prices: one for credit card purchases and another for cash customers. For instance, if you're offering a repair service, make sure to display the credit card price as the regular sale price and then offer a separate, lower price for those paying with cash. If you don't and the price difference goes over 3%, Visa might step in with fines and penalties starting at $5,000.

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.