There’s no doubt last year’s pandemic crippled sales and brought hardship to many businesses, and unfortunately, many had to close their doors for good, while others had to impose additional surcharges to stay afloat. While credit cards are extremely convenient for businesses and customers alike, the convenience comes at a cost to the business. Business owners needed a way to increase profit without alienating customers.
To help, many businesses implemented a cash discount program to cash-paying customers as a way to increase profit. Giving a discount may sound like faulty logic, but it’s completely possible with cash discount. And honestly, who doesn’t love a discount?
What Is A Cash Discount Program?
Cash discount is exactly what it sounds like. It’s offering a discount to customers who pay with cash or check instead of paying by credit card. With this method, businesses can avoid most of their credit card processing fees by incentivizing their customers to pay by cash. Cash discounting is a win-win for both the merchant and the customer, as long as the customer has cash on hand. If the customer chooses to pay by card, then they will not receive the discount. This ultimately affords businesses the ability to be more flexible in pricing their products and services, while maintaining a competitive advantage.
Can Any Business Offer Cash Discounting?
The short answer is, yes! Cash discount programs are legal in all 50 states, unlike surcharging which varies from state to state. There are a few guidelines regulated by the card industry that owners must adhere to in order to implement a compliant cash discount program.
Cash Discounting Compliance
To be fully compliant, a merchant must post signage at point of entry and point of sale, that clearly communicates the cash discount being offered, including the exact percentage of the discount. The intent of this signage is to ensure all customers are aware of the cash discount when making decision on how they will pay.
Additionally, the posted prices displayed for a merchant’s products and services must be the credit price, not the price that includes the cash discount. The cash discount must also be clearly displayed as a separate line item on the customer receipt.
Finally, while not technically required, we believe it’s always best to verbally communicate to your customers, the option to pay with cash at the point of sale and receive a discount. Communicating their payment options at check-out ensures customers are fully aware of their payment options and provides an opportunity for them to ask questions or get clarification on your cash discount program. This will result in better overall customer satisfaction as you transition to cash discounting.
While compliance may seem like a lot of work, the good news is when you enroll in Rev19’s Cash Discount program, we take care of all of the required compliance for you. This includes programming your payment terminal to include the cash discount, along with all of the required signage.
Pros & Cons of Cash Discounting
There are both pros and cons for a business to move to a cash discount program. Obviously, the biggest positive factor is eliminating almost all of the credit card processing fees, which provides an immediate boost to the bottom line. Other positive factors include the flexibility when pricing products and services.
Negative factors include potentially rubbing some customers the wrong way, those that may not be accustomed to carrying cash. Additionally, some businesses may not be comfortable with their employees handling a larger volume of cash, this should also be taken into consideration when deciding if cash discounting is right for each business.
Are cash discount programs the wave of the future?
Although it’s not for everyone, the idea is worth considering. By businesses offering customers a cash discount, even a minimal one, it can be advantageous for both the owner and customers. Businesses looking to build a strong customer base, can provide a little extra incentive for customers to pay with cash, and even stand out from the competition, it might be worth the time to consider a switch to offering cash discounts to customers.