In less than 10 years, credit card usage increased 78%, and contactless payments have skyrocketed in popularity.
Accepting multiple forms of payment at your store is a must to meet modern customer expectations, but that convenience comes with added costs for small businesses. Many businesses raise their prices to offset payment processing fees, but this penalizes customers who prefer to pay by cash.
It seems like a lose-lose situation, but there is a better alternative. Dual pricing gives small businesses a way to pass on the savings of cash transactions to their customers — and with the right technology, it’s as easy as hitting a button.
In this article, we’ll cover:
Before diving into the details, get a quick overview by watching the video below.
What Is Dual Pricing and Why Does It Help Small Businesses?
Every time a customer pays for items with a credit card or contactless payment, your payment processor charges a payment processing fee. The average payment processing fee is between 1.5 and 3.5% for every transaction.
That’s small, but it can add up over time. As a result, many stores must factor these fees into their pricing strategy to maintain healthy profit margins.
Dual pricing lets you discount items by a set amount when customers pay in cash. Put another way, it passes on the savings from not paying payment processing fees directly to your customers.
If your point of sale (POS) system supports it, dual pricing is great for small businesses. It encourages customers to pay by cash, boosting cash flow while reducing fraud and chargeback risk.
Related Read: Dual Pricing Guide
What’s the Difference Between Dual Pricing and Surcharging?
The terms dual pricing and surcharging are often used in similar contexts. The goal of both is (at least in theory) to counter the costs incurred by credit card and contactless payment processing fees.
However, there are some major differences. Here’s a more detailed breakdown:
- Surcharge: A surcharge (also known as a non-cash adjustment) adds a flat fee on top of the item price for paying by credit card. In other words, a customer would pay the sticker price for an item plus a credit card usage fee.
- Dual pricing: Dual pricing reduces the price of an item by providing a discount at the point of sale for customers paying in cash. So, the item is rung up at the sticker price, and the price is reduced during checkout.
Conceptually, surcharges and dual pricing seem pretty similar. Legally, however, it’s a different story.
Important Note: Dual pricing is legal in all 50 states, and there are only a few requirements to stay compliant, such as displaying the discount at checkout and advertising it to customers. On the other hand, credit card surcharging is currently illegal or restricted in 19 states.
Is My Business a Good Fit for Dual Pricing?
Dual pricing is best used by businesses that frequently handle cash transactions. If you’re considering offering dual pricing, use your POS system to see how many cash transactions you process daily.
Some common industries that use dual pricing include:
- Convenience stores and gas stations
- Restaurants (and grocerants)
- Tobacco stores and vape shops
- Liquor stores and breweries
- Corner shops and small grocery stores
While dual pricing is relatively easy to set up on a modern POS system, it’s not a great fit for every business.
Some customers might love dual pricing, but customers who don’t often carry cash might see it as unfair. Offering dual pricing also adds a layer of compliance risk you wouldn’t otherwise have.
Last, consider why you want to offer dual pricing in the first place. If your payment processor’s fees are too high, the best solution may be to find an alternative merchant of record.
Tips for Making Dual-Pricing a Success
With the right POS system, setting up dual pricing is easy. It’s generally done by turning on dual pricing, setting a processing fee to apply to credit card transactions, and then using a button on your touchscreen to automatically apply the cash discount at checkout.
Here are a few more tips to ensure your dual pricing strategy is successful.
- Use a compatible POS system: Not every POS system supports dual pricing natively. While you could set it up manually, there’s more room for error, which could land you in hot water with credit card companies.
- Advertise dual pricing: Clients won’t take advantage of dual pricing benefits if they don’t know it exists. Use signage throughout the store to ensure customers know about your cash discount.
- Debit vs. cash: While debit cards have lower processing fees than credit cards, they should still be charged at regular prices. Only customers paying with physical cash should receive cash discounts.
- Train your staff: Make sure to train your staff on how and when to offer dual pricing to customers.
By following these simple tips, you can reward customers for paying in cash.
Dual Pricing: How To Stay Complaint
Dual pricing is legal in all 50 states but does have compliance requirements you need to follow. Failing to do so can result in credit card processors refusing to work with you, fines from local authorities or payment processors, and other penalties.
The good news is staying compliant with dual pricing rules is simple.
- The sticker price must be the credit card price. In other words, dual pricing must show up as a discount at the point of sale. You can also list both prices, but never just the cash price.
- Have a sign that lets customers know you offer a card and cash price.
- Always apply the cash discount. You cannot selectively offer it to specific customers and not others.
Informing customers of your available discount keeps you compliant, and is a great way to advertise dual pricing. In other words, a win-win!
Simplified Dual Pricing With POS Nation
Dual pricing is a no-brainer if you’re a business that handles many cash transactions or offers big-ticket items that would benefit from a cash discount. However, to ensure it’s easy to use and fully compliant, it’s vital to use a POS system that supports dual pricing out of the box.
At POS Nation, we offer all our customers the option to implement dual pricing, whether they use us as their merchant of record or not. Dual pricing can be configured in minutes, and our solution makes it easy to apply at checkout.
Schedule a demo with our retail experts today to learn how to offer dual pricing at your store.
