Why Dual Pricing Is a Better Option Than Surcharges

Let’s talk about a pain point every retailer feels: rising credit card processing fees. You want to offset these costs, but you don’t want to frustrate your customers or seem unfair.

You’ve likely heard of two strategies: surcharges and dual pricing. While they might seem similar on the surface, one is a clear winner for building customer trust and ensuring compliance.

The better option? Dual Pricing.

What’s the difference, anyway?

First, let’s clear up the confusion. Both strategies address the same issue but in fundamentally different ways.

A surcharge is an additional fee tacked on at the register when a customer chooses to pay by credit card. The price on the shelf is the cash price. The credit card price is revealed at payment.

Dual pricing is a discount model. The price on the shelf is the credit card price. Customers who pay with cash (or debit) receive a discount off that posted price at the register.

Think of it like this: one feels like a penalty, the other feels like a reward.

What Is Dual Pricing?

What is dual pricing? The dual pricing definition is simple.

Retailers offer a discount to shoppers when they pay with cash instead of a credit or debit card. You can offer it in a couple of ways: a percentage off the total bill or using two prices for each item. This is often referred to as the dual price.

Here’s a closer look at how it works:

1. You total a customer’s order at the register, and the POS automatically adds the percentage off. Then, if paid in cash, the POS applies a line-item discount to the bill. This discount typically accounts for the credit card processing fee.

2. Alternatively, a retailer can set two prices in the database for individual items. After totaling the order in the register, the POS applies the cash discount to all items if paid in cash.

According to a survey from PYMNTS, 56% said a surcharge made them want to switch merchants.

Examples of Dual Pricing Models in Retail

Here are some examples of how a retailer might use dual pricing:

1. A restaurant might offer a 5% discount to customers who pay with cash.

2. A grocery store offers a “cash-only” lane with lower prices or a discount for shoppers.

3. A convenience store sets a discounted price for items in the store. When a customer pays with cash, the discount is applied to the order.

4. At gas stations, you’ll often see two large prices on the sign: a higher price for credit and a lower price for cash or debit. It’s straightforward and expected, and customers appreciate the choice to save.

The Benefits of Dual Pricing

Introducing a new pricing strategy is a big decision, and dual pricing offers a way to improve your store’s profitability and customer experience.

Here’s how a dual pricing model can benefit your business and create a smoother, more rewarding shopping experience:

1. Transparent Pricing Model

This is the cornerstone of the entire strategy. Dual pricing is the definition of transparency. Customers see both prices upfront, right on the shelf. There are no hidden fees or surprised reactions at the register. This honesty builds immense trust, which is the foundation of customer loyalty. People appreciate knowing exactly what they will pay, based on their payment choice.

2. Higher Profit Margins

Let’s be direct: this strategy directly protects your bottom line. Credit card processing fees can eat into your profits. A well-structured dual pricing program allows you to offset these costs effectively. By encouraging more cash transactions, you keep more of every dollar you earn. This improved cash flow can be reinvested into other areas of your business, like marketing or inventory.

3. Improved Customer Satisfaction

It might seem counterintuitive, but giving a choice leads to higher satisfaction. Unlike a surcharge, which frames credit card use as a penalty, dual pricing frames cash as a reward. Customers feel smart and empowered to choose the option that saves them money. This positive feeling is associated with your brand, making them more likely to return.

4. Legally Compliant Strategy

Navigating the rules of surcharging can be a minefield. They involve specific signage, fee caps, and even state-level restrictions (surcharges are outright illegal in some states). A dual pricing vs cash discount model is generally considered a discount program, which is legal nationwide and faces far fewer complex compliance hurdles. This makes it a safer, simpler option for many businesses.

5. Freedom of Choice

A dual price system puts the power in the customer’s hands. They are free to choose the payment method that best suits them – the convenience of a card or the savings of cash. This sense of control respects the customer and removes any potential for conflict at the point of sale.

Why Dual Pricing Wins Every Time

Choosing dual pricing over surcharges isn’t just semantics. It’s a smart business strategy with real benefits.

1. Customer Perception is Everything

A surcharge feels like a hidden fee or a penalty for using a card. It creates a negative “gotcha” moment at checkout. Dual pricing, however, frames the savings positively. It feels like a reward for paying with cash.

2. Transparency Builds Trust

With dual pricing, everything is out in the open. The pricing strategy is clear on your shelves and dual pricing signage. There are no unpleasant surprises, which builds long-term trust and customer loyalty.

3. Simplified Compliance

Surcharge programs have complex rules. They often require specific signage at the point of entry and point of sale and strict caps on fees. Dual pricing programs are typically simpler to implement and manage, reducing your risk of non-compliance.

4. It’s a Positive Conversation

Instead of saying, “There’s an extra fee for using your card,” your cashier gets to say, “You can save $X today if you pay with cash or debit!” It’s a positive end to the customer experience.

In a nutshell, dual pricing protects your profit margin without sacrificing customer satisfaction.

Tips to Successfully Implement Dual Pricing

Switching to a dual pricing model doesn’t have to be a headache. With the right preparation and tools, you can roll it out smoothly and get your customers on board.

Here’s how to set your business up for success:

1. Choose a POS System That Supports Dual Pricing

This is the most critical step. Your point-of-sale system is the engine of your checkout. It needs to handle the new pricing model automatically and flawlessly.

You need a POS system that can:

• Store and display both prices in its item database.
• Apply the cash discount automatically at the tender stage, without any manual calculation from your cashiers.
• Integrate seamlessly with your payment processor to ensure the final charged amount is always correct.
• Produce detailed sales reports that clearly separate cash and credit transactions for easy accounting.

2. Promote Dual Pricing Clearly

Transparency is your biggest advantage. Use it! Your customers should understand the program before they even reach the register.

2.1 Invest in Clear Signage

Use dual pricing signage at your store entrance and at the point of sale. Explain the program simply: “We offer a discount for cash payments!”

2.2 Update Shelf Labels

Ensure every price tag on your shelves clearly shows both the standard credit price and the discounted cash price. This prevents confusion and builds trust from the start.

2.3 Use Your Marketing Channels

Announce the change on your social media, email newsletter, or in-store digital signs (a perfect job for FTx Digital Signage!). Frame it as a new way for your customers to save money.

3. Clarify the Difference Between Debit and Cash Payments

This is a common point of confusion. Most dual pricing programs offer a discount for cash payments. However, many customers view using their debit card as the same as using cash.

3.1 Be Specific

Your signage should clearly state: “Discount applied for cash payments.” You can add, “Debit card transactions processed as credit may not qualify.”

3.2 Train Your Staff

Ensure your team can explain this politely and quickly. A good script is “Our discount applies to cash payments. While we love debit cards, our system processes them as credit, so the discount doesn’t apply. Would you like to save [amount] today with cash?”

4. Educate and Train Your Staff

Your employees are on the front line. If they understand the program, they can be your best advocates. If they don’t, they can create confusion.

Hold a training session to cover:

4.1 The “Why”

Explain how the program helps the business save on fees, which benefits everyone.

4.2 The “How”

Show them how the POS system will automatically apply the discount. Let them practice with test transactions.

Implementation Step	Key Action	FTx POS Tool That Helps
System setup	Configure items with dual prices	FTx POS & FTx Card Payments integration
Customer communication	Display clear signs & updated labels	FTx AdPro (for creating signs)
Staff training	Practice transactions and FAQs	FTx POS training mode
Process clarification	Explain debit vs. cash policy	Staff training resources

Why Consider Cash Discounting?

Credit and debit card transactions remain a popular payment choice in the U.S.

However, cash still accounts for about 20% of payments, according to Federal Reserve data. And, on average, customers carried about $73 in cash in 2022, a rise from previous years.

A dual-price cash discount, therefore, incentivizes cash payments. This approach frames the discount as a reward rather than a penalty (like a credit card surcharge). The result is a more positive customer experience.

In essence, dual pricing can help increase the number of cash sales. And result in reduced payment processing costs.

Legal Requirements for Cash Discounting

If you want to use cash discounts in your business, there are some rules you need to follow to stay compliant. Generally, these regulations vary by state. For example, you may be required to have a permit in some states.

Cash discounting is generally legal in the U.S. and is supported under federal law, including the Durbin Amendment, though merchants should check state-specific rules.

Here are some things to keep in mind:

1. Dual Pricing Signage

A rule of thumb: You can’t display the cash price without also showing the credit card price. Instead, most businesses display the credit card price only. Then, use additional signage at the register to disclose the cash discounting terms. Effective dual pricing signage ensures clarity for customers.

2. Point of Sale Signage

Use POS signage at the register to make it clear to customers how the cash discount works. You could use customer-facing displays or printed signage.

3. Entrance Signage

Use signage at the store’s entrance to market the dual pricing program’s terms and conditions. Your signs should disclose the percentage of the discount, limitations, and any fees that may apply. The key is transparency. Customers should be able to easily understand how the program works and how the discount affects the total cost.

Save on Card Fees. Launch a dual pricing program with FTx POS. Our retail point of sale system makes it easy to offer cash discounts at checkout.

Dual Pricing vs Credit Card Surcharges

Many retail businesses use credit card surcharges to offset costs. A credit card surcharge is an added fee that’s charged to customers when they pay with a credit card. For example, a business might include a 3% surcharge fee on all credit card bills.

Related Read: Credit Card Processing Fees – The Complete 2025 Guide for Small Businesses & B2B Merchants

Although surcharges seem effective, there are limitations, including:

• Create an added cost (penalty) for consumers
• Can be confusing or frustrating for consumers who are not aware of the surcharge
• Can damage a merchant’s reputation if not implemented in a transparent way

Feature	Dual Pricing	Traditional Surcharging
Customer perception	Positive (feels like a reward)	Negative (feels like a penalty)
Transparency	High (prices displayed upfront)	Low (fee revealed at checkout)
Legal landscape	Simpler & legal nationwide	Complex & restricted in some areas
Ease of use	Requires initial setup	Requires strict compliance checks
Primary goal	Encourage cash sales	Recoup credit card fees

Are Credit Card Surcharges Legal?

Another limitation is that surcharges aren’t legal in every state. In some states, surcharges are completely prohibited. And other states allow them with limitations.

For example, in Connecticut and Massachusetts, surcharges are illegal. But in California, Colorado, Florida, Kansas, Maine, New York, Oklahoma, and Texas, surcharges are subject to limitations.

What is dual pricing credit card processing? It is the application of dual pricing in the context of handling credit card transactions to offset fees.

This is another reason why dual pricing credit card processing is a better option. It’s legal and offers a more customer-friendly approach to reducing processing fees.

Considerations Before Implementing Dual Price Discounts

Before starting a dual pricing program, first think about your customers.

How do your customers prefer to pay? If you already accept a high percentage of cash payments, discounting might be a great option. And if you don’t, it will incentivize and encourage customers to pay with cash.

Again, be transparent. Make sure your customers know how pricing works and what the potential discount will be.

Pricing Strategy

You should increase prices to account for credit card processing fees and the discount. For example, if the average card processing cost was 3%, you would increase prices by 3%. That would mean a $10 item would cost $10.30 for card-paying customers but $10 with cash.

Potential Savings

You can save a lot. But the total savings depends on your credit card processing volume and how well you market the program. An effective program can increase margins by 3-5%, on average. This translates into thousands in savings per year.

Staff Training

Ensure your staff can answer any questions about terms and conditions. Plus, your employees should understand how to apply cash discounts at the register.

Lost Sales

Many retailers fear cash discounts will reduce sales and encourage customers to spend less. Again, this depends on your customers and average order values. But because cash discounting is so common, most customers are OK with paying a slight premium for the convenience of paying with a card.

Remember, since you’re not charging a penalty or added fee, people paying with cards might not even notice it.

Other Options for Reducing Credit Card Fees

Dual pricing is a useful tool for lowering credit card processing costs. However, if you implement cash discounts with other strategies, you can maximize savings.

Fortunately, most of these strategies don’t require big changes. Instead, you can implement most with signage and pricing strategy or with the help of a powerful all-in-one POS system.

1. Establish Minimums

Set a minimum purchase amount for credit card transactions. This will steer customers towards using cash for smaller purchases. And it can also encourage them to bundle items to reach the threshold for credit card use.

2. Negotiate Processing Fees

Talk with your credit card payment processor to explore lower processing fees for your merchant account. Your processing volume and willingness to switch providers can influence the negotiation process.

Use FTx Card Payments for Dual Pricing Credit Card Processing

FTx POS includes dual pricing, giving you flexibility to set multiple prices effortlessly. Plus, we offer the best integrated credit card processing rates in the industry.

We offer:

• No high-risk fees for smoke shops and other “high-risk” businesses
• Next-day fund transfers
• Unbeatable rates in the industry