A cash discount is a program where you offer a discount to customers who pay via cash. So, for example, if the total order price is $50 and the cash discount offered is 10%, now if a customer wants to pay via cash, he will need to pay $45, [$50 – $5 (cash discount)]. However, if he wishes to pay via credit card the amount will remain the same, i.e., $50, and no cash discount will be offered.
The idea behind a cash discount program is to offer a discount (off the regular sale price) to the customers at the time of sale when they pay via cash. On the other hand, if they choose to pay via a card, they would not be entitled to any benefits of a cash discount. A cash discount is the most legitimate way of including the card processing fees in the amount to be paid by the customer. However, in order to use the cash discounts, the merchants must increase the item prices accordingly, as the discount needs to be applied automatically to each item when a guest pays through cash.