Cash Discount Program: A Simple Guide for Merchants

There?s no denying that COVID has already established long-lasting effects on all types of businesses. But ask the owner of any brick-and-mortar store, and they?ll let you know 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 is becoming increasingly expensive for merchants who 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 method to do that 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? 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 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 easy to use, convenient, and often come with incentives like cash back or airline miles. So to get customers more inclined to create 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.

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 straight into your payment terminal. The software was created to encourage your clientele to pay via cash or gift card.

When cash discount payment processing would go to check out, a little service charge is applied to the sale. Here, they will have the option to pay with cash or perhaps a gift card, that will result in a computerized discount. However, if they choose to continue with a credit or debit card, the typical price which includes the service charge will stay.

The transparency at checkout helps it be clear to customers that they will receive a discount if they pay in cash while also empowering them to create their own decision and pay how they need. The result is that the business 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 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 definitely be followed when implementing cash discount merchant services. Tidal Commerce will help you in guaranteeing compliance and ensuring you have the proper register and door signage necessary.

Great things about 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 few of the other merchant benefits may even surprise you.

1. Reduce transaction fees
One of 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. 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 decrease your payment processing fees by around 90 percent.

2. Encourage cash payments
As we mentioned, credit cards come with built-in incentives, so getting customers to improve 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 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 can 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 the business.

5. Please customers
Everybody loves a discount. And for many customers, finding a discount just for paying cash seems like being rewarded for nothing. Although some business owners worry that cash incentives may discourage their customers, folks are used to seeing cash discounting at car dealerships, gas stations, and more. A cash discount program allows customers to save lots of money and pay through their preferred method.

6. Simplify statements
Fewer card payments bring about more straightforward monthly statements for the business. Since the cash discount program is fully implemented into your existing merchant services, there is no drastic change to one’s body.

Cash discount vs. surcharge program
While cash discounts may seem exactly like 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 provide 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 to some card brands.

Marketing, baby!
While it might just seem like semantics, consumers may behave differently when confronted with a discount versus a supplementary charge. While by the end of your day, most customers notice charge card processing fees are increasingly being passed on to them, the marketing of the procedure makes an impact. Allowing customers the opportunity to receive a discount is going to be better received than charging a surcharge for charge 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 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 business may still benefit from 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? A rise in cash payments will also mean an increase in cash on hand. While this minimizes the opportunity of credit card fraud, it may increase employee theft or target burglary. In addition, you’ll be in charge of counting cash every night and ensuring it arrives at the bank safely.

Are similar businesses offering cash discounts? Observe 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 own competitors but not you, it might drive them to alternative merchants.

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