There have been worries among many retailers about credit card surcharges and whether they are legal to offer in their states. But the increasingly high credit card processing fees these businesses are paying have become especially concerning. Businesses are trying to manage these fees to keep their profit margins under control. But they also want to do this while staying within legal means and without risking possible losses in their work.
The good news is that cash discount programs and merchant services are available. These work like credit card surcharges in that a business will pass its charges on to the customers. But the difference is that whereas a credit card surcharge entails an extra charge after the transaction, a cash discount involves people saving money by paying for things with cash.
The best part is that these cash discount programs are legal throughout the country. The Durbin Amendment makes it possible for businesses to handle these cash discounts.
The importance of cash discounts is that they provide a better way for people to save on their transactions. It also entails ensuring the cash discounts people can find aren’t interpreted as fees. It becomes easier for people to trust a business because it offers a good discount.
Understanding the Durbin Amendment
The Durbin Amendment is a part of the 2010 Dodd-Frank Law that allows cash discount programs and merchant services to operate throughout the United States. The Durbin Amendment says that businesses can offer discounts to customers who pay for things with cash. The offer is an incentive to get people to pay with cash instead of credit cards.
The amendment says that cash discounts can work so long as they do not interfere with what payment card networks utilize. The amendment also insists that any changes in price will be reductions and not increases. In this case, the “discount” refers to a reduction in the regular price.
The regular prices at the business must be the ones that are for credit card transactions. The retailer can highlight the cash discount at one’s entrance, although it should be planned carefully to highlight something of interest.
How Much Can the Discount Be Worth?
The cash discount can be worth an approximate amount of the credit card processing fee that the business will spend. If a company typically spends 5 percent on its credit card transactions on processing charges, it could offer a 5 percent discount on cash-based payments. The total provides a good round number, plus it gives customers a better incentive for using a service they can trust.
Companies can plan their discounts as they wish, although they should be realistic. The discount should be suitable enough to cover the processing fees, but it shouldn’t be deep enough to where it might offset the possible gains the company may earn. Proper control is necessary for ensuring something works well when offering these discounts.
A Safe Approach
A cash discount is more viable than if one was to utilize a surcharge. There are ten states in the country where credit card surcharges are illegal, with California and Texas being the most prominent ones.
The states where surcharges are allowed may have limits on how much of a charge a retailer can impose. Merchants also have to register with Visa, MasterCard, and other applicable card brands and networks to receive permission to offer these surcharges.
Even if a business meets all legal standards surrounding surcharges, it may not be as popular. A company could be subject to criticism even if it charges a small bit of money for a credit-based transaction.
Cash discounts are easier, as they don’t require people to go through legal hoops to get them to work. Cash discounts also don’t put retailers at risk of potentially losing access to their systems.
How Can People Impose These Cash Discounts?
Businesses can highlight cash discounts by ensuring the listed prices they offer are for card-based payments. The listed prices will not entail extra fees for card-based payments. The effort is different from a surcharge that lists the extra fee at the end of the transaction.
A business can post a message at the entrance or a register that a customer can save money by paying for something in cash. The specific discount can be listed here. The employee can also verbally disclose this discount to the customer as necessary.
Any cash discounts the customer will get can also appear on a receipt. The discount will appear on the receipt to highlight what someone is getting out of a cash-based transaction.
The essential part is to avoid posting prices as cash-based ones. The business should promote how people can save more money with cash instead of trying to explain any possible charges. It is easier for people to trust a business when it focuses on the discounts available instead of any possible charges that may be imposed in the work someone provides.
The business should not also try and say that the cash discount program is not a convenience fee. The legal jargon surrounding such a term can be confusing at times. Avoiding some of these complicated or potentially misleading terms is critical for success when handling different business activities.
A Smart and Legal Choice
Any business looking to offset the increasing credit card fees that networks charge can benefit from offering cash discounts. Cash discounts are legal and sensible, plus they provide a fair approach to work. The risk of a business getting in legal trouble for offering cash discounts is minimal.
A business can check its merchant service setup and identify a suitable approach to work that fits its needs. Merchant services are available to help support cash discounts by providing POS platforms that can handle these discounts. Proper counseling for setting up a system is also available, giving all retailers the control they need over whatever payments they wish to handle at any moment.