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 who owns 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. In addition, 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 method 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 pay 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 user friendly, convenient, and often include incentives like cash back or airline miles. So to get customers more inclined to create cash payments, businesses have to offer them something better still – discounts!

As cash discounting program to encourage cash payments, merchants implement cash discounting by waiving the service fee that comes 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 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 program is built to encourage your clientele to cover via cash or gift card.

When a customer goes to check out, a small service charge is put on the sale. Here, they will have the option to cover with cash or 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 that includes the service charge will remain.

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 very own decision and pay how they need. The result is that the business owner can pass payment processing fees to the client while also allowing them the chance to earn a cash discount.

Is a cash discount program legal?
A cash discount program is totally 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, 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 in addition to ensuring you have the proper 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, the advantages of a cash discount program don?t end there. Some 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. Should they still move forward with a credit or debit payment, you?ve already built those processing fees into the product’s final price. In any event, you can decrease your payment processing fees by around 90 percent.

2. Encourage cash payments
As we mentioned, bank cards come with built-in incentives, so getting customers to improve their payment method can take plenty of work. Offering cash discounts will make customers feel just 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 advantage 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 your business.

5. Please customers
Everybody loves a discount. And for most customers, receiving a discount just for paying cash appears like being rewarded for nothing. Although some companies worry that cash incentives may discourage their customers, people 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’s 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, what sort of programs operate is totally 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 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 all fifty states. Surcharges are illegal in ten states and require advance notice for some card brands.

Marketing, baby!
While it might just seem like semantics, consumers may behave differently when met with a discount versus a supplementary charge. While at the end of the day, most customers will see that credit card processing fees are increasingly being passed on to them, the marketing of the process makes an impact. Allowing customers the opportunity to receive 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 may be more inclined to consider cash discount merchant processing programs. For example, 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 some of the best fits, your organization may still benefit from cash discounting! If you’re not sure whether it’s a good idea for the business, consider the following:

Do you prefer cash payments? An increase in cash payments will also mean an increase in cash on hand. While this minimizes the chance of credit card fraud, it could increase employee theft or target burglary. In addition, you’ll be responsible for counting cash every night and ensuring it arrives at the bank safely.

Are similar businesses offering cash discounts? Observe your competition. Should they?re offering cash incentives, then it?s likely a successful initiative which can be beneficial to you. If customers receive a cash discount from your own competitors however, not you, it might drive them to alternative merchants.

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