As credit card processing fees continue to eat into profits, many restaurant owners are looking for ways to offset those costs.
Two of the most talked-about strategies are surcharging and cash discounting. Both approaches can help reduce the burden of credit card fees, but they work in different ways and come with their own pros and cons.
So, what’s the difference—and which one is the better fit for your restaurant? Let’s take a closer look.
What Is Surcharging?
Surcharging is when you add a small fee—typically around 3%—to the bill of any customer who pays with a credit card. This fee helps cover the cost of processing the transaction. The idea is simple: if a customer chooses the convenience of paying with plastic, they share in the cost of that choice.
However, there are strict rules around surcharging. For example, it’s only allowed in certain states, and you must clearly disclose the fee to the customer before the transaction.
Also, you can only surcharge credit cards—not debit cards. It's important to work with a payment processor who can help you stay compliant with all the legal requirements.
What Is Cash Discounting?
Cash discounting works the other way around. Instead of adding a fee for credit cards, you offer a small discount—often the same 3%—to customers who pay with cash. This approach is generally viewed more positively by customers because it feels like a reward rather than a penalty.
Cash discounting is legal in all 50 states, as long as it’s clearly advertised and applied properly. You’ll need signage that explains the pricing and a POS system that can calculate both cash and card prices automatically.
Which One Is Best for Your Restaurant?
It depends on your business model and your customers. If you’re in a fast-casual setting with a lot of smaller transactions, cash discounting might be more appealing. It keeps things simple and avoids the negative perception some customers may have about surcharges.
On the other hand, if your customers are more used to credit card use and you're in a state where surcharging is allowed, adding a surcharge can directly recover your processing costs without changing your listed menu prices.
