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 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. Furthermore, credit card processing has become 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 way to do this is through cash discount programs. With cash discounting, consumers can save money on the purchases while also lowering payment processing charges for business owners.
Curious if a cash discount program might 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 cover with cash rather than using a credit or debit card. This can help lower merchant processing fees for the business.
Consumers are attracted 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 obtain best cash discount program inclined to make cash payments, businesses have to give you them something better still – discounts!
So that you can encourage cash payments, merchants implement cash discounting by waiving the service fee that is included with card payments. Offering cash discounts to customers can result in Tidal Commerce clients saving around 90 percent of their 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 entire process is built directly into your payment terminal. The software is built to encourage your clientele to pay via cash or gift card.
When a customer goes to check out, a small service charge is put on the sale. Here, they have the option to cover with cash or a gift card, that may result in an automatic discount. However, should they choose to continue with a credit or debit card, the standard 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 make their very own decision and pay how they want. The result is that the business enterprise owner can pass payment processing fees to the client while also allowing them the opportunity to earn a cash discount.
Is really 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, there are regulations, including state laws and card brand rules, that must be followed when implementing cash discount merchant services. Tidal Commerce will assist 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 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 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. When the incentive works and customers choose 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 in to 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 include built-in incentives, so getting customers to improve their payment method may take many work. Offering cash discounts will 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 won’t have to await processing times.
3. Automated terminals
By implementing the cash discount program with Tidal Commerce, there?s little to no focus 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 subject to chargebacks, and if a cash-paying customer wants a refund, there will not be chargeback penalties for the business.
5. Please customers
Everyone loves a discount. And for most 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, people 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 result in more straightforward monthly statements for the business. Because 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 might seem exactly like 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 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 look like semantics, consumers may behave differently when confronted with a discount versus a supplementary charge. While at the end of your day, most customers notice charge 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 will likely be better received than charging a surcharge for charge 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 will surely benefit from such programs. Other great fits include shops and boutiques that sell clothing, specialty items, or gifts.
While those forms of businesses may be the best fits, your organization may still reap the benefits of cash discounting! If you’re not sure whether it’s a good idea for your business, consider the following:
Can you prefer cash payments? A rise in cash payments may also mean a rise in cash readily available. While this minimizes the chance of credit card fraud, it may 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.
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Are similar businesses offering cash discounts? Observe your competition. Should they?re offering cash incentives, then it?s likely an effective initiative which can be good for you. If customers get a cash discount from your competitors but not you, it might drive them to alternative merchants.