Rising operating costs, from ingredients to rent, have put a huge strain on the restaurant industry. As these costs continue to increase, many restaurant operators are looking for ways to improve revenue, and many are shifting to implementing guest-facing fees. Restaurant operators have a few different options they can consider when implementing guest fees to offset costs. It's critical that restaurant operators understand the differences between these options because some may be better suited for a restaurant than others. Additionally, there are various card brand rules and requirements, as well as laws and regulations, that may result in significant financial penalties or other liabilities if not adhered to. Each merchant should carefully and objectively weigh the different cost offsetting options at their disposal, including how each might impact guest behavior.
Options for Offsetting Costs
Credit Card Surcharging: A credit card surcharge is a percentage (%) fee that is only added to a check if the guest uses a credit card instead of another form of payment, and it must follow specific rules set by card networks and applicable laws. See the Credit Card Surcharging Overview article in Support Center to learn more about the applicable rules, requirements, and laws. Credit card surcharges can not be applied to debit card transactions.
Credit Card Surcharging at Toast: Toast's Credit Card Surcharging product is the only way to apply credit card surcharges on the platform today in a manner that complies with card brand rules. Debit card transactions are identified by BIN number by Toast when utilizing our compliant Toast Credit Card Surcharging product to ensure the surcharge is not applied to these payments. Please note that Toast Credit Card Surcharging is only available to merchants that meet certain eligibility requirements, and merchants are responsible for ensuring compliance with applicable laws and card network rules. See Get Started With Credit Card Surcharging to learn about Toast's product solution, if you are eligible.
Dual Pricing (Cash Discounting): A cash discount is when the posted price is the one that applies to card transactions, and if the guest pays in cash, they are offered a discount from that advertised price. Wherever menu prices are listed, a merchant must show the price applicable for non-cash payments for each item, whether on the menu or any other locations where prices are posted (e.g., receipts, promotions, and elsewhere), not solely the discounted cash price. A merchant may choose to couple its cash discounting program with an overall increase to its menu/advertised prices that incorporates certain operating costs (such as card processing fees) it wishes to recover, but this is not a requirement. See the Cash Discounting Overview article in Support Center to learn more about cash discounting rules and requirements.
Dual Pricing at Toast: Toast's Dual Pricing product automatically displays card and cash totals before a guest pays for their order and automatically applies the cash discount after a guest pays in cash. Learn more at Toast Dual Pricing Overview.
Toast Dual Pricing is currently available only to eligible new US customers when they sign up with Toast. It is not yet available to existing Toast customers. If you're interested, join the waitlist to stay informed as availability expands. |
Service Charges: A service charge is an additional fee (can be a percentage or fixed/flat fee) added to a check in addition to the sale of goods and services provided and is not specific to the payment method used by the guest. Service charges must apply to all payment methods equally (including credit cards, debit cards, gift cards, and cash).
Service Charges at Toast: See the Service Charges Overview article in Support Center to learn more.
Compare Options
| Credit Card Surcharging | Dual Pricing (Cash Discounting) | Service Charges |
Description | Offset credit card processing costs by adding a fee to orders that are paid by credit card | Offset credit and debit card processing costs by incorporating these fees into listed prices for card transactions and offering a discount on orders that are paid by cash | Offset operational costs associated with a specific service provided or for general business reasons unrelated to the use of any payment method by guests |
Payment Method and Pricing Restrictions | Surcharge can only be applied to orders paid by credit card; it cannot be applied to debit cards, gift cards, or cash | Discount can only be applied to orders paid by cash. All listed/advertised prices (including on menus) must show the higher card price, not solely the discounted cash price | The service charge must apply to all payment methods equally (including cash and gift cards) |
State Restrictions | Not permitted in Connecticut, Maine, and Massachusetts. Applicable laws may regulate or restrict credit card surcharging in other states or jurisdictions (e.g., New York) | Generally permitted in all US states | Applicable laws may regulate or restrict certain fees |
Maximum Amount | Must be a fixed percentage that is not greater than the actual cost of processing credit cards. The absolute maximum set by card brand rules is 3% (Note: States may further limit the maximum rate for merchants located there.) | Not applicable since no fee is being applied, but the cash discount can be any fixed percentage (no maximum) | Can be a flat fee or fixed percentage; no cap |
Disclosure Requirements | Under card brand rules, a credit card surcharge must be disclosed to guests before they choose to make a purchase. Guests must be aware that the credit card surcharge does not apply to debit cards and does not exceed the restaurant's cost of processing credit cards. Card brand rules also require disclosures placed at the points of entry to the location, points of sale, and on receipts. We also recommend adding disclosures to menus, websites, checks, and dining areas as necessary to inform guests. Applicable laws may impose additional or different requirements. | To remain compliant, the availability of discounts from listed prices for cash transactions must be disclosed to guests clearly and conspicuously before they make a purchase. | Any fee added to a guest check must be clearly and conspicuously disclosed to guests before they choose to purchase. We recommend disclosing your service charge where necessary to inform guests, such as at points of entry, points of sale, menus, dining areas, and on receipts. Applicable laws may impose additional requirements. |
Additional Restrictions | Cannot be used in combination with Dual Pricing (Cash Discounting) | All listed/advertised prices (including on menus) must show the higher card price, not solely the discounted cash price; Dual Pricing (Cash Discounting) cannot be used in combination with Credit Card Surcharging | Naming conventions have additional restrictions and recommendations (e.g., “Convenience Fee” may put a restaurant at risk if it is not used correctly) |
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Which is Right for You?
Dual Pricing may be the best fit if you are comfortable incorporating card processing costs into your posted menu prices and want to give guests the option to pay a lower price with cash. Guests see the card price upfront and receive a discount when they pay with cash, rather than having a fee added to their order. This may also be a good option if you prefer to avoid guest-facing fees.
Credit Card Surcharging or Service Charges may be a better fit if you prefer to keep your listed menu prices lower and add a separate fee instead.
Credit Card Surcharging, in particular, may be the better fit if you still want to offer guests a payment option that avoids the fee. The surcharge applies only to credit card transactions and does not apply to payments made with cash, debit cards, or gift cards.
A Service Charge may be right for you if you are comfortable adding a mandatory fee to every order, regardless of how the guest pays. Service charges must apply equally to all payment methods, including credit cards, debit cards, gift cards, and cash.
Additional Resources
This content is provided for informational purposes only and is not intended as legal, tax, or other professional advice. You are responsible for your own compliance with applicable laws and regulations, including card brand rules. You should contact your attorney or other relevant professional advisors for advice specific to your circumstances.