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The Cash Discount program was developed to allow business owners to pass the cost of processing credit cards to their card holders. Merchants post a sign that states the prices listed at their business are cash prices only, and if any other form of payment is used – the 4% cash incentive is removed, therefore the price of the transaction will be 4% more. The terminal will prompt the card holder to agree to 4%, and they will collect that amount on the transaction.
The Law states, in the Durbin Amendment (part of the 2010 Dodd-Frank law), businesses are permitted to offer a discount to customers as an incentive and to encourage customers to pay by alternative methods other than a credit/debit cards including either checks or cash in order to automatically receive a discount which is applied at the time of sale.
Clear and conspicuous signage is required by law to be displayed at the business entry point and at the point-of-sale, to easily and accurately explain the discount program payment options and if a customer chooses to pay with cash or check the service charge is discounted.
Also, for many businesses, the cash discount program when marketed appropriately function as a tool to attract new customers. Most of the customers like the idea of discount, and this is the reason why most stores have a "SALE" sign displayed throughout the year. A 4 percent price across the board might achieve your goal as a merchant with respect to covering the expenses for processing, but it would not be as powerful as a cash discount program correctly implemented.