Cash discount merchant services programs are popular among retailers for how they can help offset merchant service fees. A retailer can pass the interchange fees and other charges on to the customer, but the retailer can also give the customer a discount for paying for items with cash or a check. The system helps retailers spend less on interchange fees, which is critical for those with slim profit margins. It also helps give retailers the funds they need right now instead of waiting for a credit card transaction to be fully processed.
Such programs have been utilized by various retailers for years. Gas stations are a good example, as many offer listings that show how much you’d spend on gas if you paid in cash versus if you used a credit card. These stations highlight this discount as a means of being transparent over what is open here.
The challenge of managing such a program can be rough for some. Your ISO can offer a cash discount merchant services program if you use the right steps and efforts in making the process work. Much of this includes ensuring the retailer uses the right technology and the proper effort to highlight such discounts to people.
Focusing On Getting Paid While Staying Legal
The main goal of an ISO is to get paid for offering merchant services programs to other people. Your ISO can incorporate a markup on the interchange rate. While the markup you impose may be small, it will still be worthwhile when you get dozens or hundreds of clients in your system. You’ll collect more money from all these parties after a while, especially if you recognize what works in the process.
For a cash discount merchant services program, you’ll need to look at the technology that works in the terminals you will offer and support. The terminals should be capable of accepting such cash discount programs while legally illustrating the cash discounts people will receive when they pay for things with cash.
The service fee you include in your ISO work should be labeled as a suitable cash discount. Failing to highlight it the right way could result in the cash discount becoming a credit card surcharge. Such surcharges are illegal in some states, plus some customers may interpret the charge as a greedy measure on your end. Illustrating the fee the right way and highlighting the benefit of paying for something with cash is better, especially when this is promoted before someone chooses whether one will pay for something with cash or a card.
What Should a Receipt Include?
Your ISO can offer a cash discount program by highlighting how a customer’s receipt will appear when completing a transaction. The receipt will include a few things to highlight the cash discount that the customer will earn from the deal:
- The base amount of the order
- The cash discount that works here
- The total cost of the customer’s order
For example, a customer who pays with a credit card will notice a fee at the bottom. The “cash discount” section will appear as nothing. But for a cash-based payment, the customer will see the discount underneath the fee. The discount and fee should be of the same value, meaning the customer will avoid paying that extra charge because of one’s payment method.
The customer will recognize that a retailer is offering a cash discount. But the customer will not feel ripped off by paying for something with a credit card, as the customer will have been aware of the potential savings beforehand if the retailer does things right.
The Retailer’s Role
While your ISO can provide this solution to retailers, those stores will still need to play their part in ensuring these discounts can work. An ISO must use a few rules:
- Any cash discounts the retailer wishes to provide should be highlighted at the entrance and checkout areas. These are the places where people will be more likely to see what is open.
- The added service fee should appear on the receipt.
- The customer should also be given verbal notice of the cash discount before choosing a payment method.
The cash discount entails the customer being aware of the deal before choosing the payment option. Anything where the customer is informed of this after the fact will be a surcharge, which is still illegal in many places.
Be Sure Your Technology Is Compliant
The last point to follow when offering cash discount solutions as an ISO is to look at the technology you’re incorporating in your work. The terminals and other items you promote should be capable of managing cash discounts.
A cash discount line item should be included in your terminals. The terminal should display this line item on a receipt for the transaction to be legally interpreted as a cash discount deal.
Many processors and credit card brands will not allow ISOs to profit on card transactions. You could profit by accidentally charging people more than what they were charged by their processors. The only charge you should be imposing is whatever markup you agreed upon when starting your ISO work with your processor. Discussing your plans for charges and how the cash discount will work with your processor will be essential for everyone’s needs.
Don’t forget that not all clients will have the technology necessary for some of these functions. Some clients may not be willing to spend extra on certain materials, including the terminals and computers necessary to get a card transaction running well.
Watch how you’re offering a cash discount solution if you’re running an ISO. The process can be affordable and interesting to potential customers, but that doesn’t mean it is always going to work as well as you would expect. Look at how your ISO will offer its services, and watch how a retailer will offer something that fits your needs.