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 let you know that COVID killed cash payments.
Unfortunately for business owners, 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 is becoming increasingly expensive for merchants who are now searching for avenues to greatly 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 that is through cash discount programs. With cash discounting, consumers can save money on their purchases while also lowering payment processing costs for business owners.
Curious in case a cash discount program can help your business? Have a look at 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 rather than using a credit or debit card. This can help lower merchant processing fees for the business.
Consumers are drawn to card payments for a number of reasons. They are simple to use, convenient, and often come with incentives like cash return or airline miles. So to obtain customers more inclined to make cash payments, businesses have to give you them something better still – discounts!
So as to encourage cash payments, merchants implement cash discounting by waiving the service fee that comes with card payments. Offering cash discounts to customers can result in Tidal Commerce clients saving up to 90 percent of their payment services fees.
How does cash discount work?
The very best part about implementing a cash discount with a merchant services provider like Tidal Commerce is that the complete process is built directly into your payment terminal. The software is designed to encourage your clientele to pay via cash or gift card.
When a customer would go to check out, a little service charge is applied to the sale. Here, they will have the option to cover with cash or a gift card, that may result in a computerized discount. However, if they elect 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 can receive a discount if they pay in cash while also empowering them to create their 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 a cash discount program legal?
A cash discount program is completely legal across all the states in america, 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 definitely 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 is 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 may even surprise you.
1. Reduce transaction fees
Probably the most apparent benefits for merchants that adopt a cash discount program is reduced or eliminated card-processing fees. Once the incentive works and customers choose to pay in cold hard cash, you eliminate expensive merchant fees altogether. If they still move forward with a credit or debit payment, you?ve already built those processing fees into the product’s final price. Either way, 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 great deal of work. Offering cash discounts will make customers feel just like they’re being rewarded for cash payments. This means you’ll also have faster usage of those funds as you won’t have to wait for processing times.
3. Automated terminals
By implementing the cash discount program with Tidal Commerce, there?s little to no focus on your end. The terminals you utilize, including most third-party terminals, will automatically apply the discount, gently encouraging your customer to pay 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 will be taken benefit of. Cash payments aren’t subject to 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 just 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 lots of money and pay through their preferred method.
6. Simplify statements
Fewer card payments result in more straightforward monthly statements for the business. Because the cash discount program is fully implemented into your existing merchant services, there’s no drastic change to your system.
Cash discount vs. surcharge program
While cash discounts may seem exactly like a surcharge program at first glance, what sort of programs operate is totally different, plus they are subject to different rules and regulations. The key difference is that cash discounts provide a cheap for cash payments, while a surcharge adds additional fees on top of the posted price.
Cash discount and surcharge programs each face different guidelines from state legislation or card brand rules. Cash discounts, when implemented properly, are legal in all fifty states. Surcharges are illegal in ten states and require advance notice to some card brands.
While it may just seem like semantics, consumers may behave differently when met with a discount versus an extra charge. While at the end of the day, most customers will see that credit card processing fees are increasingly being passed on in their mind, the marketing of the procedure makes a big difference. Allowing customers the opportunity to get a discount is going to be better received than charging a surcharge for credit card payments.
Is cash discounting right for the business?
Certain businesses could be more inclined to consider 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 types of businesses may be among the best fits, your business may still reap the benefits of cash discounting! If you’re not sure whether it’s a good idea for your business, think about the following:
Do you prefer cash payments? An increase in cash payments will also mean a rise in cash on hand. While this minimizes the chance of credit card fraud, it could increase employee theft or target burglary. Furthermore, cash discount terminal ‘ll be in charge of counting cash every night and ensuring it finds 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 that could be good for you. If customers receive a cash discount from your competitors however, not you, it might drive them to alternative merchants.