There?s no denying that COVID has had long-lasting effects on all types of businesses. But ask the owner of any brick-and-mortar store, and 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. In addition, credit card processing has become increasingly expensive for merchants who are now looking 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 spend less on their purchases while also lowering payment processing charges for business owners.
Curious in case a cash discount program can help your business? Check out our simple guide on cash discounting!
Exactly what is a cash discount program?
A cash discount program is when a business offers customers a monetary incentive to pay with cash instead of using a credit or debit card. This helps 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 get 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 comes 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 very best part about implementing a cash discount with a merchant services provider like Tidal Commerce is that the entire process is built directly into your payment terminal. The program is built to encourage your clientele to pay 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 pay with cash or a gift card, that may result in an automatic discount. However, should they elect 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 can receive a discount if they pay in cash while also empowering them to make their very own decision and pay how they need. The result is that the business enterprise 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 completely legal across all of 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 across the country.
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 along with 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 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
Just about the most apparent benefits for merchants that adopt a cash discount program is reduced or eliminated card-processing fees. When the incentive works and customers opt to pay in cold hard cash, you eliminate expensive merchant fees altogether. Should they still progress with a credit or debit payment, you?ve already built those processing fees into the product’s final price. In any event, you can lower 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’ll also have faster usage of those funds as you will not have to wait for 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 cash discounting program 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 will be taken advantage of. Cash payments aren’t subject to 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, receiving 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, gas stations, and 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 your system.
Cash discount vs. surcharge program
While cash discounts may seem the same as a surcharge program at first glance, what sort of programs operate is completely different, plus they are subject to different rules and regulations. The main element difference is that cash discounts offer 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 all 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 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 process makes a big difference. Allowing customers the chance to get a discount will likely 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 take into account 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 types of businesses may be the best fits, your organization may still reap the benefits of cash discounting! If you are not sure whether it’s a good idea for your business, consider the following:
Can you prefer cash payments? A rise in cash payments will also mean a rise 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 finds the bank safely.
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Are similar businesses offering cash discounts? Observe your competition. If they?re offering cash incentives, then it?s likely an effective initiative that could be good for you. If customers receive a cash discount from your competitors but not you, it might drive them to alternative merchants.
