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Credit Card Processing cash discounts

Cash Discounts

Friend or Foe?

Every day at NCMIC, we get several calls regarding cash discounts. Doctors have seen offers or been approached by merchant processing companies promising “no-fee processing” or “FREE merchant processing ” with the implementation of a cash discount program. If your first instinct is that such offers are too good to be true, you're correct. While these claims can be intriguing, they are misleading.

It’s not that all cash discount programs are bad. For some businesses, they work well. The problem is, there are many different programs out there – some making confusing claims. Even more importantly, health care providers have special considerations when it comes to cash discounts.

Considerations for Health Care Providers

You may know some doctors who offer a cash discount program. They may not seem to have any problems. Plus, if you’ve talked with other credit card processing companies, they may not address any complications and concerns such a program could create for your practice.

The Reality

There are several legal issues and implications at both the state and federal levels. This makes sense when you consider how a cash discount program could complicate payments for Medicare, insurance copayments, HSAs, etc. And that’s just the tip of the iceberg.

Bottom Line

We encourage our doctors to be informed when it comes to a cash discount program. You may be approached by companies promising no-cost or free processing, so it’s important to understand what a cash discount is, how different programs work and what businesses need to watch out for.

What is a Cash Discount?

A true cash discount program is when customers who pay by cash or check receive a discount and pay less than the regular price. If someone pays by credit card, they will pay the normal price you have posted without the cash discount. It really is that cut and dry (or it should be).

Cash discounts came about as a way for businesses to recoup credit card processing fees. This is understandable, but the waters start getting muddy when some companies profit from cash discount programs, instead of just making up for processing fees.


Cash discounts have nothing to do with surcharges. The terms “surcharge” and “cash discount” are often used interchangeably, which is incorrect. The listed or posted price of a service or product is the regular price. If you charge customers a fee on top of that price, that is a surcharge. We advise against surcharges.

Crossing Lines

Some available cash discount programs make it easy to tack on various fees that are passed on to your customers who pay by credit card.

Example: Some programs allow businesses go up to 10% for a “cash discount.”

Remember: The true intent of a cash discount program is to recoup processing fees, which are generally no more than 4%. So, instead of breaking even, these companies are making a profit.

The NCMIC Approach

We work hard to provide an outstanding processing program in service and price. We want you and your customers to be happy; therefore, we do not encourage you to pass extra, unnecessary fees to your customers. (Just because you can doesn’t mean you should.) So, if you are considering a cash discount program, think it through carefully, including all the possible legal ramifications as a health care provider.

What to Watch For

If you see a cash discount program offered that touts no-cost or free processing, be wary. The costs are just buried somewhere or called something else. No credit card processing can be free. Someone has to pay those fees, because accepting credit cards comes with a price. It is credit, after all, and credit carries a certain amount of risk.

NCMIC, as your credit card processing company, and the credit card associations like Visa® and Mastercard® take on the risk for you so you can offer that payment option. Fees are incurred to cover some of these risks.

Look Before You Leap

When our customers call, saying they are thinking about switching to a company with no-cost or free processing, they often talk with Roger Miller, Account Representative. Roger’s goal is to help business owners understand what making a switch could really mean in terms of pricing and fees.

Advice from Roger Miller

“Let’s say you pay 2-2.5% in fees with us. The other company may suggest you charge your customers 4%. Remember, it costs you 2.5%. Where does that other 1.5-2% that your customers are paying go?

It goes to the credit card processing company. They get the 2.5% PLUS the extra 1.5% from your customer. That’s quite a profit.

If a business owner wants to implement a cash discount, why not raise the actual cost of services and products by 4%, continue to pay us the lower price of 2.5% and keep that 1.5% for their own pocket instead of giving it to a credit card processing company?

It would be a true cash discount. Prices advertised would reflect the 4% increase. When a customer pays with cash, the business owner takes 4% off the price. It seems like a win-win for the business owner AND the customer.

If you’re processing $10,000 a month, 1.5% would be $150. Why shouldn’t YOU keep that extra money instead of giving it to a credit card processing company?”

Now What?

We know cash discounts can be a confusing topic. It’s hard to know what to believe. At NCMIC, we’re here to help! Our goal is to always do the right thing for you and your patients while being transparent.

Whenever you have questions, please give us a call at 1-800-396-7157. We’d love to talk with you about cash discount programs and considerations for you as a health care provider. We truly want your practice to be successful and your customers happy.

We recommend that health care providers consult an attorney for specific legal advice before implementing a cash discount program. 

Credit card processing is offered by NCMIC Finance Corporation.

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