There?s no denying that COVID has already established long-lasting effects on all sorts of businesses. But ask the owner of 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. In addition, credit card processing has become increasingly expensive for merchants that 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 method to do that is through cash discount programs. With cash discounting, consumers can cut costs on the purchases while also lowering payment processing costs 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 pay with cash rather than using a credit or debit card. This can help lower merchant processing fees for the business enterprise.
Consumers are drawn to card payments for a variety of reasons. They are simple to use, convenient, and often include incentives like cash return or airline miles. So to obtain customers more inclined to make cash payments, businesses have to offer them something even better – 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 their monthly payment services fees.
So how exactly 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 program was created to encourage your clientele to cover via cash or gift card.
When a customer would go to check out, a little service charge is put on the sale. Here, they will have the option to cover with cash or perhaps a gift card, that may result in a computerized discount. However, should they choose to continue with a credit or debit card, the typical price which includes the service charge will remain.
The transparency at checkout makes it clear to customers that they can receive a discount should they pay in cash while also empowering them to create their own decision and pay how they need. The effect is that the business enterprise owner can pass payment processing fees to the customer while also allowing them the chance to earn a cash discount.
Is really a cash discount program legal?
A cash discount program is totally legal across all 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, you can find regulations, including state laws and card brand rules, that must definitely be followed when implementing cash discount merchant services. Tidal Commerce will help you in guaranteeing compliance in addition to ensuring you have the correct register and door signage necessary.
Benefits of a cash discount program
The primary goal of cash discounting for most business owners would be to offset their payment processing costs. However, the benefits of a cash discount program don?t end there. Some 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. Once the incentive works and customers opt to pay in cold income, you eliminate expensive merchant fees altogether. If they still move forward with a credit or debit payment, you?ve already built those processing fees in to the product’s final price. Either way, you can decrease your payment processing fees by up to 90 percent.
2. Encourage cash payments
As we mentioned, credit cards include built-in incentives, so getting customers to change their payment method may take lots of work. Offering cash discounts will make customers feel like they’re being rewarded for cash payments. This implies you will also have faster usage of those funds as you won’t have to await processing times.
3. Automated terminals
By implementing the cash discount program with Tidal Commerce, there?s little to no work on your end. The terminals you utilize, including most third-party terminals, will automatically apply the discount, gently encouraging your customer to cover with cash.
4. Minimize chargebacks
A chargeback is a reversal of a credit or debit card charge, implemented initially as a safety feature for customers paying with plastic. However, chargebacks are extremely 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
Everybody loves a discount. And for many customers, finding a discount simply for paying cash appears like being rewarded for nothing. While some business owners worry that cash incentives may discourage their customers, people are used to seeing cash discounting at car dealerships, gas 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 pos systems . surcharge program
While cash discounts might seem exactly like a surcharge program at first glance, the way the programs operate is completely different, and they are subject to different rules and regulations. The main element difference is that cash discounts offer a cheap 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 confronted with a discount versus an extra charge. While by the end of the day, most customers will see that credit card processing fees are being passed on in their mind, the marketing of the procedure makes an impact. 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 may be more inclined to consider cash discount merchant processing programs. For example, hospitality companies offering quick service or casual dining spots can definitely reap the benefits of such programs. Other great fits include shops and boutiques that sell clothing, specialty items, or gifts.
While those forms of businesses may be some of the best fits, your organization may still benefit from cash discounting! If you are not sure be it a good idea for your business, consider the following:
Do you prefer cash payments? An increase in cash payments may also mean an increase in cash on hand. While this minimizes the chance of credit card fraud, it may increase employee theft or target burglary. Furthermore, you’ll be in charge of counting cash every night and ensuring it finds the bank safely.
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Are similar businesses offering cash discounts? Take note of your competition. Should they?re offering cash incentives, then it?s likely an effective initiative that may be good for you. If customers get a cash discount from your own competitors but not you, it might drive them to alternative merchants.