Non Cash Adjustment Programs: 5 Legal Mistakes You're Making (And How to Fix Them Before 2026)

Non-cash adjustment programs: also called cash discount or surcharge programs: are becoming essential tools for small businesses fighting back against rising credit card processing fees. But here's the problem: many business owners are making critical legal mistakes that could cost them thousands in fines, customer disputes, or even lawsuits.

With new regulations rolling out in 2025 and stricter enforcement expected in 2026, now's the time to get your program compliant. According to recent industry reports from Digital Transactions and TSG Payments, businesses implementing these programs correctly are seeing 2-4% improvements in their profit margins: while those doing it wrong are facing regulatory headaches.

Let's dive into the five biggest legal mistakes small business owners make with non-cash adjustment programs and how to fix them before regulators come knocking.

What Are Non-Cash Adjustment Programs?

Before we jump into the mistakes, let's get clear on what we're talking about. Non-cash adjustment programs allow businesses to either offer a discount for cash payments or add a fee for card payments. The goal is simple: shift the cost of credit card processing away from your business and back where it belongs.

But here's where it gets tricky: the legal landscape varies dramatically depending on where you're located and how you structure your program.

Mistake #1: Ignoring State-Specific Regulations

The Problem: This is the big one. Business owners often assume that if surcharging is legal at the federal level, it's automatically legal in their state. Wrong.

According to the Retail Solutions Providers Association (RSPA), ten states still have laws restricting or prohibiting credit card surcharges: California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma, and Texas. But even within these states, the rules are changing rapidly.

Recent Updates: TSG Payments reports that several states have modified their surcharge laws in 2025, with some allowing surcharges under specific conditions while others have clarified their cash discount policies.

The Fix:

• Research your specific state's current regulations: don't rely on outdated information

• Check local municipality rules, as some cities have their own restrictions

• Consider cash discount programs instead of surcharges if you're in a restricted state

• Consult with a payment processing attorney familiar with your jurisdiction

Pro Tip: Even if surcharging becomes legal in your state, existing contracts with customers might prohibit it, so review your agreements carefully.

Mistake #2: Failing to Properly Disclose Fees to Customers

The Problem: Many businesses think a small sign by the register is enough. It's not. Federal and state disclosure requirements are specific and strict.

Digital Transactions recently highlighted several court cases where businesses faced lawsuits because their disclosure practices didn't meet legal standards. Customers successfully argued they weren't properly informed about surcharges before completing their transactions.

Current Requirements:

• Written disclosure at the point of entry to your business

• Clear signage at the point of sale

• Verbal notification before processing the transaction

• Specific language requirements that vary by state

The Fix:

• Post clear, visible signs at all entrances stating your surcharge policy

• Ensure your POS system displays the surcharge amount before the customer authorizes payment

• Train staff to verbally inform customers about surcharges during the transaction process

• Use the exact wording required by your state's regulations: generic language isn't enough

Mistake #3: Not Coordinating Properly with Your Payment Processor

The Problem: You can't just decide to start surcharging tomorrow. Your payment processor needs to support surcharge programs, and there are specific technical requirements for implementation.

TSG Payments data shows that improperly implemented surcharge programs are one of the leading causes of compliance violations. Without proper processor coordination, you might be violating card network rules without even knowing it.

What Goes Wrong:

• Processors that don't support surcharging properly

• Incorrect surcharge amounts being applied

• Surcharges applied to prohibited transaction types

• Missing required transaction data

The Fix:

• Contact your processor before implementing any surcharge program

• Ensure they specifically support compliant surcharge processing

• Verify your POS system can handle the technical requirements

• Test the system thoroughly before going live

• Request documentation showing your setup meets all card network requirements

CardPlus customers benefit from built-in compliance features that automatically handle proper surcharge implementation and reporting: learn more about our dual pricing solutions.

Mistake #4: Surcharging Prohibited Transaction Types

The Problem: Not all transactions can legally include surcharges. This is where many businesses get into serious trouble with card networks and regulators.

According to recent RSPA guidelines, businesses commonly make these prohibited surcharge mistakes:

Transactions You CAN'T Surcharge:

• Debit card transactions (in most states)

• Prepaid card transactions

• Business-to-business transactions (in some states)

• Government payments

• Transactions under certain dollar amounts (varies by state)

The Fix:

• Understand exactly which transaction types you can and cannot surcharge

• Program your POS system to automatically exclude prohibited transactions

• Train staff to recognize different card types

• Implement clear policies for handling business customers

• Regularly audit your transactions to ensure compliance

Mistake #5: Improper Technology Implementation

The Problem: Your POS system and payment setup need to handle surcharges correctly from a technical standpoint. Many businesses use outdated systems or improper configurations that create compliance issues.

Digital Transactions reports that technology-related compliance failures are increasing as more businesses adopt surcharge programs without upgrading their systems properly.

Common Technical Mistakes:

• Using POS systems that can't properly calculate and display surcharges

• Incorrect surcharge percentages programmed into the system

• Missing required transaction reporting

• Inability to separate surcharge amounts for tax purposes

• Poor integration between POS and payment processing systems

The Fix:

• Invest in modern POS technology that supports compliant surcharge programs

• Ensure your system can automatically calculate correct surcharge amounts

• Verify that surcharge data is properly recorded and reported

• Test all integration points between your POS and payment processor

• Maintain detailed records of all surcharged transactions

Looking to upgrade your payment technology? Check out our guide on modern payment terminals vs outdated systems to see what features you need for compliant surcharge programs.

Getting Ready for 2026: Enhanced Enforcement Coming

Industry sources including TSG Payments and RSPA are warning that 2026 will bring enhanced enforcement of surcharge regulations. State attorneys general are ramping up compliance investigations, and card networks are implementing stricter monitoring systems.

What This Means for You:

• Higher penalties for violations

• More frequent compliance audits

• Increased customer complaints and potential lawsuits

• Greater scrutiny from regulators

Steps to Take Now:

1. Conduct a complete compliance audit of your current program

2. Document all policies and procedures

3. Train staff thoroughly on proper procedures

4. Update your technology if needed

5. Establish regular compliance review processes

The Bottom Line: Compliance Pays

Getting your non-cash adjustment program legally compliant isn't just about avoiding penalties: it's about maximizing your savings while protecting your business. Properly implemented programs can save small businesses thousands annually in processing fees.

But cutting corners on compliance will cost you more in the long run. The businesses succeeding with these programs are the ones investing in proper setup, technology, and ongoing compliance management.

Ready to implement a compliant non-cash adjustment program? CardPlus specializes in helping small businesses navigate these complex regulations while maximizing their savings. Our systems are designed with built-in compliance features that automatically handle the technical requirements, and our team stays current on all regulatory changes.

Don't wait until 2026's enhanced enforcement catches you off guard. Contact us today to discuss how we can help you implement a legally compliant program that actually saves you money.

Sources: This article references current industry information from TSG Payments (https://tsgpayments.com/newsfilter/), Digital Transactions, and the Retail Solutions Providers Association (RSPA). Regulations vary by state and change frequently: always consult with qualified legal counsel for your specific situation.