According to Levitin:
“(Some) merchants accept payment cards but attempt to steer customers toward cheaper payment methods by offering discounts for non-card payments or by asking customers for a specific payment type. Card network no-surcharge rules (and state law in eleven states) prevent merchants from imposing a surcharge on credit or debit cards, but, by federal law, the card associations may not prevent merchants from doing the mathematical equivalent by offering a cash discount. Merchants rarely use cash discounts because they are not particularly effective in affecting consumer behavior, unlike a surcharge for credit use, because of the well-documented cognitive bias of the framing effect. Although mathematically the same, consumers perceive surcharges and discounts differently, much like a bottle half-full or half-empty, and react much more strongly to a surcharge than to a discount.”
An earlier paper by Levitin (“The Antitrust Superbowl: America’s Payment Systems, No-Surcharge Rules, and the Hidden Costs of Credit”) provides more detail on how consumers perceive surcharges and discounts to be different.
“The different framing effects of a discount or a surcharge are powerful. It is a well-documented behavioral bias that people have stronger reactions to losses and penalties than to gains. For example, in a recent survey of Dutch consumers’ opinions on credit card surcharges and cash discounts, attitudes were substantially more negative towards surcharges than towards discounts, in spite
of the economic equivalence. Accordingly, although the credit card lobby has never embraced cash discounts, it has preferred them to credit surcharges, because consumers perceive a discount as a gain, but a surcharge as a penalty and will prefer to use another payment system rather than be penalized for using credit.”
This is of course a huge threat to card usage. It is also one of the biggest threats to interchange, if not the single most important one. Merchant coalitions appear to be shifting their strategy away from court mandated regulation of interchange fees, and appear to be moving instead toward greater transparency, making it clear to consumers how much merchants must spend on interchange, so as to set the platform for massive surcharging. See my prior blog post, "Radio ad attacks interchange fees, hints at possible shift in merchant coalition objectives".