There?s no denying that COVID has had 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 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 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 way to do this is through cash discount programs. With cash discounting, consumers can cut costs on the purchases while also lowering payment processing charges for business owners.
Curious if a cash discount program can help your business? Have a look at our simple guide on cash discounting!
Exactly 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 variety of reasons. They are simple to operate, 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 offer them something even better – discounts!
To be best cash discount program 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 up to 90 percent of these payment services fees.
So how exactly does cash discount work?
The 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 was created to encourage your clientele to cover via cash or gift card.
When a customer goes to check out, a little service charge is put on the sale. Here, they have the option to pay with cash or perhaps a gift card, that will 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 will receive a discount if they pay in cash while also empowering them to make their own decision and pay how they need. The effect is that the business owner can pass payment processing fees to the client 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 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 assist you in guaranteeing compliance along with ensuring you have the proper register and door signage necessary.
Benefits of a cash discount program
The primary goal of cash discounting for some business owners would be to offset their payment processing costs. However, the advantages 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. Once the incentive works and customers choose to pay in cold income, you eliminate expensive merchant fees altogether. Should 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 can take lots of work. Offering cash discounts can 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 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 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 really costly for merchants and can be taken benefit of. Cash payments aren’t at the mercy of chargebacks, and if a cash-paying customer wants a refund, there will not be chargeback penalties for the 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. Although 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 bring about more straightforward monthly statements for your 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 might seem exactly like a surcharge program on the surface, 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 provide a lower price for cash payments, while a surcharge adds additional fees on top of 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 to some card brands.
Marketing, baby!
While it may just look like semantics, consumers may behave differently when confronted with a discount versus a supplementary charge. While at the end of the day, most customers notice credit card processing fees are increasingly being passed on in their mind, the marketing of the process makes an impact. Allowing customers the chance to get a discount is going to be better received than charging a surcharge for credit 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 can definitely benefit from such programs. Other great fits include retail outlets and boutiques that sell clothing, specialty items, or gifts.
While those forms of businesses may be the best fits, your business may still benefit from cash discounting! If you’re not sure whether it’s a good idea for your business, consider the following:
Can you prefer cash payments? An increase in cash payments will also mean a rise in cash readily available. While this minimizes the opportunity of credit card fraud, it could increase employee theft or target burglary. Furthermore, you’ll be in charge of counting cash every evening and ensuring it finds the bank safely.
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Are similar businesses offering cash discounts? Observe your competition. Should they?re offering cash incentives, then it?s likely a successful initiative that 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.