Cash Discount Program: A STRAIGHTFORWARD Guide for Merchants

There?s no denying that COVID has already established long-lasting effects on all sorts of businesses. But ask the owner of 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. In addition, credit card processing has become increasingly expensive for merchants that 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 this is through cash discount programs. With cash discounting, consumers can save money on the purchases while also lowering payment processing costs for business owners.

Curious in case 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 when 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.

Consumers are attracted to card payments for a number of reasons. They are easy to use, convenient, and often include incentives like cash return or airline miles. So to get customers more inclined to create cash payments, businesses have to give you them something better still – discounts!

So as 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 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 program is made to encourage your clientele to pay via cash or gift card.

When a customer would go to check out, a small service charge is applied to the sale. Here, they will have the option to pay with cash or perhaps a gift card, which will result in an automatic discount. However, if they elect to continue with a credit or debit card, the standard price that includes the service charge will remain.

The transparency at checkout makes it clear to customers that they will receive a discount should they pay in cash while also empowering them to create their own decision and pay how they want. The effect 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 a cash discount program legal?
A cash discount program is completely 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 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 main goal of cash discounting for most business owners would be to offset their payment processing costs. However, the advantages of a cash discount program don?t end there. A few of the other merchant benefits could even surprise you.

1. Reduce transaction fees
One of the 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 move forward with a credit or debit payment, you?ve already built those processing fees in to the product’s final price. In any event, you can lower your payment processing fees by up to 90 percent.

2. Encourage cash payments
As we mentioned, bank cards come with built-in incentives, so getting customers to improve their payment method may take a lot of work. Offering cash discounts can make customers feel like they’re being rewarded for cash payments. This means you’ll also have faster access to 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 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 extremely costly for merchants and may be taken advantage 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
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, gasoline stations, and much 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’s no drastic change to your system.

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 regulations. The key difference is that cash discounts provide a cheap 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 might just seem like semantics, consumers may behave differently when confronted with a discount versus an extra charge. While by the end of your day, most customers will see that charge card processing fees are being passed on in their mind, the marketing of the procedure makes a big difference. 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 example, hospitality companies offering quick service or casual dining spots will surely reap the benefits of 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’re not sure whether it’s a good idea for the business, consider the following:

Can 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 may increase employee theft or target burglary. In addition, you’ll be in charge of counting cash every evening and ensuring it finds the bank safely.

Are similar businesses offering cash discounts? Observe your competition. If they?re offering cash incentives, then it? dual pricing merchant services that may be beneficial to you. If customers get a cash discount from your competitors but not you, it might drive them to alternative merchants.

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