As restaurants struggle with inflation and thin margins, payment processing costs have become a significant concern. In the U.S., credit card processing is now the third-largest operating expense for a typical restaurant, behind only food and labor costs. These “card swipe fees,” which are roughly 2-4% of each credit card sale, have risen sharply in recent years. Industry data show U.S. merchants paid about $187.2 billion in interchange and processing fees in 2024, roughly 70% higher than before the pandemic.

For a small restaurant, this can amount to tens of thousands of dollars a year, eroding already razor-thin margins. With menu-price inflation already squeezing customers, many operators are wary of simply raising prices again. Instead, a growing number are quietly passing some card costs back to customers through dual pricing, offering a small discount for cash or applying a modest surcharge on credit cards, to shore up profits without a blanket price hike.

Rising Card Swipe Fees and Pressure on Margins

Over the past decade, the U.S. payments landscape has tilted further toward cards. Nearly 70% of restaurant transactions are now non-cash, and networks like Visa and Mastercard capture a slice of each credit sale. While consumers enjoy rewards and convenience, restaurants literally pay for the privilege. For every $100 on a bill, a typical U.S. restaurant might keep only about $97.50 after interchange and gateway fees are paid to banks and processors.

Those deductions add up fast. In 2024 alone, U.S. credit and debit card swipe fees totaled a record $187.2 billion. This was about $1,200 for the average family, and the cost has jumped roughly 70% since 2019.

This spike has turned card fees into a crisis for restaurants. Until recently, small restaurants could absorb credit card charges without drawing attention. But rising food and labor costs mean margins are thinner than ever. Credit card processing has become the third-highest expense for a typical restaurant, behind only food and payroll. For a local bistro, paying even 2-3% on $1 million in annual sales can eat up $20,000-$30,000 from the bottom line – more than the profit on many months of business. Faced with this pressure, operators report they can no longer ignore the cost.

At the same time, restaurants have few tools to push back. Unlike large chains, most independents can’t negotiate drastically lower rates with Visa/Mastercard. They can’t refuse cards (it’s against card brand rules), and lowering menu prices to offset fees only digs a hole for survival, not sustainability. With public and regulatory attention on the cost of living, any significant menu price increase risks customer backlash.

Dual Pricing, Cash Discounts, and Surcharges

Dual pricing means posting two prices for the same item: a slightly lower price for cash payments and a higher price for credit/debit card payments. Under this model, paying with cash effectively earns a slight “discount” (e.g., 2-3%) off the menu price. The same effect can be achieved by adding a surcharge when a card is used, though terminology and legal nuances differ. These programs are identical; card users pay a bit more, cash users pay a bit less. The economics are straightforward: the extra cents on card payments cover the processing fee, while cash patrons receive a discount.

This strategy is common in some industries (e.g., fuel stations have long listed separate cash and credit fuel prices). Now, more restaurants are experimenting.

Customers rarely notice and don’t care; nearly everyone pays by card anyway. Even after adding the surcharge, the tab for a dinner order remained competitive with nearby restaurants. A higher price for a card payment is a ‘normal’ trend, and many other local eateries do it. By openly displaying both prices, customers see precisely what they save by paying cash.

Other tech-forward examples have emerged. In 2024, the popular restaurant POS provider Toast quietly began offering a surcharge feature to its 120,000 clients. Toast has just raised its processing rates for some merchants (for the first time in 12 years) and now allows restaurateurs to add a compliant surcharge at checkout if they choose. If a diner on a $50 bill sees a 3% fee, the restaurant nets an extra $1.50 (about the same as the processing cut).

Toast believes this helps protect restaurants’ bottom lines without carving an obvious fee into the price list. Other POS systems, such as Square, Shift4, and Clover, also offer “cash discount” or “dual pricing” options.

The idea is gaining traction. Surcharging and cash-discount programs are still emerging, not yet ubiquitous. A 2024 NRA survey found that only about 16% of operators had any surcharge or cash discount in place. (This low figure includes extra fees for large parties or delivery; true payment surcharges were even rarer then.) However, real-time data suggest rapid growth: a December 2025 merchant study reported roughly one-third of businesses (across sectors) were now adding card surcharges, up from under 5% in 2021.

In restaurants, anecdotal evidence from Texas to New York shows local eateries quietly adopting cash specials or “service charges” labeled as a fee to cover card processing costs. All told, the trend reflects a shift toward greater price transparency: instead of mixing fees into menu prices, restaurants are signaling the actual cost of credit in real time.

Implementing Cash Discounts – Practical and Legal Considerations

Implementing cash discounts or surcharges isn’t just a business decision – it involves careful compliance. Payment networks and state laws set strict rules. At the federal level, merchants may apply a surcharge on credit card transactions (subject to network rules), but most states ban such fees outright or cap them at around 4%. As of late 2025, only a handful of U.S. states (Connecticut, Maine, Massachusetts, and Puerto Rico) prohibit surcharges on card payments. Other states (like New York and California) allow surcharges only if they are clearly disclosed and do not exceed the actual fee charged.

For example, New York law forbids separately listing a surcharge line on a check, effectively requiring merchants to call it a “discount for cash.” Importantly, network rules insist that debit card payments cannot be surcharged – only credit cards are fair game.

For these reasons, most restaurants frame the adjustment as a cash discount rather than an add-on fee. They post one price (the higher “card price”) on menus and signage, then deduct a few percent at checkout when cash is used. This “two-tier pricing” approach skirts legal issues in restrictive jurisdictions and is fully sanctioned by Visa and Mastercard, provided the discount is clearly advertised.

Regardless of method, successful rollout hinges on transparency. Restaurants should prominently disclose dual pricing on menus, websites, signs at the register, and printed receipts. Some owners report telling new customers in a one-sentence script (“we can do 2% off for cash”) to avoid confusion. Customers are generally placated if they understand the reason and see their savings; surprise or misleading fees, by contrast, can spark negative reviews or even regulatory scrutiny.

Operationally, the shift usually requires minimal effort. Modern POS systems typically include built-in features to apply cash discounts or surcharges and handle bookkeeping to split sales figures. Restaurants planning this change are advised to consult their payment processor and local attorney: ensure the chosen method (cash discount vs. surcharge) is permitted in their state, set the correct percentage to avoid exceeding actual costs, and train staff to explain it to guests. When done right, many merchants find the process smooth – staff say customers usually appreciate the discount option, and don’t often remark on it after the first visit.

Impact on Diners and Market Dynamics

How are customers responding? Early evidence is mixed. Some diners grumble that new “fees” feel like junk charges, while others are indifferent. In some cases, guests still paid by card and barely noticed the change. In fact, many customers expect merchants to quote a cash price: gas stations have trained Americans to think of the card price as the “regular” price, with a built-in card fee. A rising share of merchants (34%) now impose surcharges on card purchases. This means card-carrying diners will increasingly encounter small upcharges on their bills.

For a frequent restaurant-goer, the effects can be tangible. A typical 2.5% surcharge can easily wipe out a 2% credit card rewards rate, effectively turning a modest purchase into a net loss for the cardholder.

On the other hand, savvy consumers can adapt. A few patrons may opt to pay in cash upon seeing the discount. Local credit unions and associations have even mounted “cash is king” campaigns, highlighting that a $0.50 coffee surcharge, for instance, could add up over time – and suggesting cash as a way to support local businesses.

In most cases, however, the convenience of plastic reigns. The NRA reported that Americans have grown accustomed to “cashless” dining (even though some data show credit cards used slightly less than debit at restaurants, over 60% of spending is non-cash). If anything, the new pricing may encourage a few more diners to keep a $20 bill handy, but it is unlikely to reverse the overall trend toward electronic payments.

From a market standpoint, the rise of cash discounts is already influencing competition. Restaurants that impose surcharges may be at a disadvantage if nearby competitors do not (or if those competitors quietly absorb the cost through slightly higher menu prices). However, the amounts are relatively small, like a 3% surcharge on a $100 tab is $3, which many diners accept as the “cost of doing business” for card convenience.

Some franchise chains have held back on surcharges to avoid customer backlash, while independents and locals (who cannot easily raise prices further) seem more willing to experiment. Notably, some diners and watchdogs classify surcharges as “junk fees,” a term now under regulatory scrutiny. Federal agencies (and some states) are cracking down on undisclosed add-on fees across industries. As a result, any restaurant that adopts dual pricing must ensure the charge is advertised transparently and labeled appropriately, or risk violating consumer protection rules.

Looking Ahead: Policy and Industry Trends

The scramble over swipe fees isn’t happening in a vacuum. Restaurant groups and merchant coalitions are lobbying for broader fixes. The National Restaurant Association, for example, actively supports the Credit Card Competition Act (CCCA), proposed legislation to introduce more networks and transparency into the card system.

NRA research suggests that enforcing competition could save merchants and consumers more than $16 billion per year. Likewise, the Independent Restaurant Coalition and food industry associations regularly urge Congress to cap or reduce interchange fees, arguing that smaller independents suffer disproportionately under the current Visa/Mastercard duopoly. Efforts like these have had mixed progress: the CCCA has stalled repeatedly, and even regulatory tweaks (like cap on debit fees under the Durbin Amendment) offer only limited relief.

In the meantime, many restaurants are taking matters into their own hands. Dual pricing is one tactic among several in a broader cost-saving toolbox. Alongside surcharges and cash discounts, operators are trimming operating hours, re-engineering menus (dropping unprofitable dishes), and using loyalty programs and off-peak promotions to boost revenue.

Some chains are even encouraging customers to use cheaper payment methods. For instance, a few upscale chains remind diners that cash and debit cards cost less (though they cannot legally refuse plastic). Ultimately, the billing strategy a restaurant chooses will depend on its clientele and local regulations.

What does this mean for consumers? Diners should be aware that two prices may appear. If a menu notes a “cash price” or if the receipt shows separate totals, that is the restaurant’s way of passing along processing costs. Paying cash will save the stated percentage, while using a credit card will trigger the higher price.

Financially savvy customers can adapt by calculating their net rewards: if your credit card bonus is 1-2%, a 3% surcharge might negate any gain. In the long term, if legislation forces lower interchange fees, these surcharges could disappear. For now, however, restaurants see them as a necessary counterbalance to protect staff, service, and food quality amid overwhelming costs.

Conclusion

Mounting card fees have pushed U.S. restaurants to explore pricing models long used elsewhere: offering discounts for cash or surcharging card users. The trend is driven by economics: as credit card networks capture an ever-larger share of each dining dollar, independent restaurants have little margin left to absorb those costs.

If current patterns persist, customers may start to view cash not as archaic, but as financially savvy – at least at the local cafe. Meanwhile, the industry and lawmakers will continue to debate whether to rebalance the system through regulation. For restaurants and diners alike, the message is clear: be alert for new price signals at the table.

Frequently Asked Questions