Ribbis: Discount on Pre-payment

Is it permissible to offer a discount for early payment? For example, a 6 class series costs $100 per class if paid at the door, but one can pre-pay for all the classes and will only pay $500.

Shalom!

Thank you for your question!

Your question finds its origins in the pages of the Talmud.

The Talmud (1) teaches that it is not permitted to advance payment to a worker before he begins an agreed upon job in order to receive a discount on the worker’s fee. It is explained that an advance payment appears to be somewhat of a loan to the worker, who will then provide the agrred upon service that is truly valued more than the actual money he received. This is said to resemble “ribbit” an interest-generating transaction. It is biblically forbidden, a severe transgression in fact, for Jews to work with interest between one another.

However, if the worker begins his work and later decides to continue working at a lower price if he was to receive full payment at that time, this would be permitted. In this situation, the now advanced wages do not resemble an interest-gaining loan. It is merely seen as a discount for work that has already begun and will continue. (2)

With this introduction, we can now answer your question. It is permitted to offer a package of “get 6 class for $100 each or pre-pay and get all 6 classes for only $500.” There is no problem of offering a discount for the advance payment in such an arrangement as long as the student/customer is fully committed to the entire package of sessions. This can be accomplished by having a signed contract prepared that binds the individual to the program (and fees) without possibility of retraction. (3)

1. 1. Bava Basra 86b

2. 2. YD 176:8

3. 3. Shach, CM 333:14. See also The Laws of Ribbis 10:21-28