What Is Dual Pricing?

A Revolutionary Credit Card Processing Strategy

In the fast-paced world of financial decision-making, staying ahead of the curve is essential for any business seeking growth and success. This is especially true as you search for cost-reduction exercises to retain employees without cutting back on any other avenue of your company. As someone responsible for the financial health of your organization, you understand the importance of optimization to guarantee success. One aspect of your organization where optimization opportunities exist is your merchant account — specifically, the fees associated with payment processing. Taking advantage of the tools at your disposal will give you more control over your processing fees and help you counteract market shifts and inflationary pressures.

In the wake of Visa’s most recent changes to the surcharging cap, merchants are searching for alternative strategies that offer similar impacts. A lesser-known and under-discussed payment solution exists that not only offers unparalleled transparency but also empowers you to tailor services to your unique business needs. This solution is called dual pricing and it’s a game-changing model that’s revolutionizing the merchant services industry, especially after recent developments regarding surcharging. Dual pricing gives you a more hands-on approach to managing your organization’s financial health. In the ever-evolving world of commerce, staying ahead of the game is crucial for businesses seeking sustainable growth and profitability. Among the many advancements that have reshaped the merchant services landscape, dual pricing stands above the rest as a disruptive and incredibly useful tactic. 

What is Dual Pricing?

Simply put, a dual pricing system provides discounts to customers who opt to pay with cash. This is a win-win incentive that saves your customers money while reducing your credit card transaction fees. Businesses can adopt this pricing model through a payment terminal or point-of-sale (POS) system, presenting both cash and credit prices. Or, if you’re handling business-to-business transactions, you can list the payment options on your clients’ invoices. To ensure compliance, it’s crucial to advertise the credit card price either as the full amount or alongside the cash price.

Dual Pricing vs. Surcharging

As a financial officer, it’s vital to distinguish dual pricing from surcharging, considering their unique characteristics and legal implications. Surcharging entails adding a line-item fee to the purchase price when customers pay with credit cards. Dual pricing, on the other hand, displays a lower cash price as a discount. While surcharging increases the price, dual pricing discounts it. This is significant because each system could influence customer perception differently. 

Additionally, while dual pricing is legally permissible nationwide, surcharging is prohibited in some states and subject to specific regulations in others, with varying maximum surcharge rates. Furthermore, credit card brands may have their own rules concerning surcharging.

Considerations Before Implementing Dual Pricing

Just like with surcharging or any other payment solution, dual pricing will impact your business differently depending on a wide variety of factors. For the purposes of this analysis, we’ll take a deep dive into dual pricing considerations for a middle-market B2B service provider. However, it’s important to perform a similar analysis if your business doesn’t fall under this category. As you assess whether dual pricing aligns with your middle market B2B service provider’s objectives, keep these essential factors in mind.

The Payment Preferences of Your Customers

Analyze your customers’ payment habits and preferences. If a significant proportion already prefers cash or ACH payments, dual pricing could be an effective strategy to introduce alternative ways to collect dollars while reducing your days to collect. This approach allows credit card users to cover the full price while regular cash-paying/ACH customers benefit from the discounted cash price. However, if a substantial portion of your customer base uses credit cards, dual pricing might be perceived as penny-pinching and could adversely impact your business.

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