Cash Discount Program: A Simple Guide for Merchants

There?s no denying that COVID has already established long-lasting effects on all sorts of businesses. But ask who owns any brick-and-mortar store, plus they?ll tell you that COVID killed cash payments.

Unfortunately for companies, the downfall of cash and the rise of contactless and digital payments has only increased the financial burden of payment processing costs. Furthermore, credit card processing has become increasingly expensive for merchants that are now searching for avenues to help them reduce this expense.

With customers preferring non-contact payments, businesses must get creative to encourage cash payments from their customers. One way to do this is through cash discount programs. With cash discounting, consumers can spend less on their purchases while also lowering payment processing charges for business owners.

Curious if a cash discount program might help your business? Check out our simple guide on cash discounting!

What is a cash discount program?
A cash discount program is whenever a business offers customers a monetary incentive to cover with cash instead of utilizing a credit or debit card. This helps lower merchant processing fees for the business enterprise.

Consumers are attracted to card payments for a number of reasons. They are simple to use, convenient, and often come with incentives like cash back or airline miles. So to get customers more inclined to make cash payments, businesses have to offer them something better still – discounts!

As a way to encourage cash payments, merchants implement cash discounting by waiving the service fee that is included with card payments. Offering cash discounts to customers can lead to Tidal Commerce clients saving around 90 percent of these monthly payment services fees.

How does cash discount work?
The best part about implementing a cash discount with a merchant services provider like Tidal Commerce is that the entire process is built directly into your payment terminal. The program is made to encourage your clientele to pay via cash or gift card.

When a customer goes to check out, a small service charge is applied to the sale. Here, they will have the option to pay with cash or perhaps a gift card, which will result in an automatic discount. However, should they choose to continue with a credit or debit card, the standard price that includes the service charge will remain.

The transparency at checkout makes it clear to customers that they will receive a discount should they pay in cash while also empowering them to create their very own decision and pay how they want. The effect is that the business enterprise owner can pass payment processing fees to the customer while also allowing them the opportunity to earn a cash discount.

Is really a cash discount program legal?
A cash discount program is completely legal across all of the states in the US, unlike credit surcharges which are illegal in ten states. The Durbin Amendment that passed with the Dodd-Frank financial reform legislation protects the allowance of cash discounts in the united states.

That being said, there are regulations, including state laws and card brand rules, that must be followed when implementing cash discount merchant services. Tidal Commerce will assist you in guaranteeing compliance along with ensuring you have the correct register and door signage necessary.

Benefits of a cash discount program
The main goal of cash discounting for some business owners would be to offset their payment processing costs. However, some great benefits of a cash discount program don?t end there. A number of the other merchant benefits could even surprise you.

1. Reduce transaction fees
The most apparent benefits for merchants that adopt a cash discount program is reduced or eliminated card-processing fees. When the incentive works and customers choose to pay in cold hard cash, you eliminate expensive merchant fees altogether. Should they still progress with a credit or debit payment, you?ve already built those processing fees into the product’s final price. In any event, you can lower your payment processing fees by up to 90 percent.

2. Encourage cash payments
As we mentioned, bank cards include built-in incentives, so getting customers to improve their payment method may take a lot of work. Offering cash discounts can make customers feel like they’re being rewarded for cash payments. This implies you will also have faster access to those funds as you will not have to await processing times.

3. Automated terminals
By implementing the money discount program with Tidal Commerce, there?s little to no work on your end. The terminals you use, including most third-party terminals, will automatically apply the discount, gently encouraging your customer to cover with cash.

4. Minimize chargebacks
A chargeback is really a reversal of a credit or debit card charge, implemented initially as a safety feature for customers paying with plastic. However, chargebacks are really costly for merchants and may be taken benefit of. Cash payments aren’t at the mercy of chargebacks, and when a cash-paying customer wants a refund, there won’t be chargeback penalties for your business.

5. Please customers
Everyone loves a discount. And for most customers, receiving a discount simply for paying cash appears like being rewarded for nothing. While some companies worry that cash incentives may discourage their customers, folks are used to seeing cash discounting at car dealerships, gasoline stations, and much more. A cash discount program allows customers to save money and pay through their preferred method.

6. Simplify statements
Fewer card payments result in more straightforward monthly statements for your business. Since the cash discount program is fully implemented into your existing merchant services, there is no drastic change to your system.

Cash discount vs. surcharge program
While cash discounts might seem the same as a surcharge program at first glance, the way the programs operate is completely different, plus they are subject to different regulations. The key difference is that cash discounts offer a lower price for cash payments, while a surcharge adds additional fees along with the posted price.

Law compliance
Cash discount and surcharge programs each face different guidelines from state legislation or card brand rules. Cash discounts, when implemented properly, are legal in every fifty states. Surcharges are illegal in ten states and require advance notice for some card brands.

Marketing, baby!
While it may just look like semantics, consumers may behave differently when met with a discount versus a supplementary charge. While at cash discount payment processing of the day, most customers will see that charge card processing fees are increasingly being passed on in their mind, the marketing of the process makes a big difference. Allowing customers the opportunity to get a discount will likely be better received than charging a surcharge for charge card payments.

Is cash discounting right for your business?
Certain businesses could be more inclined to take into account cash discount merchant processing programs. For instance, hospitality companies offering quick service or casual dining spots will surely benefit from such programs. Other great fits include shops and boutiques that sell clothing, specialty items, or gifts.

While those forms of businesses may be among the best fits, your organization may still benefit from cash discounting! If you are not sure be it a good idea for the business, consider the following:

Can you prefer cash payments? An increase in cash payments may also mean a rise in cash on hand. While this minimizes the opportunity of charge card fraud, it may increase employee theft or target burglary. In addition, you’ll be responsible for counting cash every evening and ensuring it arrives at the bank safely.

Are similar businesses offering cash discounts? Take note of your competition. If they?re offering cash incentives, then it?s likely a successful initiative which can be good for you. If customers get a cash discount from your own competitors however, not you, it might drive them to alternative merchants.

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