Have you considered incorporating a cash discount program into your business efforts? You will find a cash discount program to be useful for when you’re aiming to reduce or outright erase your credit card processing fees.
A cash discount program entails giving customers a discount for paying for a product or service with cash or a check instead of with a credit card. A customer who pays with credit will not receive a discount, but those customers with a cash-based payment will get the special deal.
The discount effort provides a better way to handle card transactions. But you must also look at how the discount works and that you know how you will implement it.
How Do You Get This To Work?
A cash discount program entails a few steps to help you make it work:
- Check on the credit card processing fees you spend on each transaction.
You could spend about 3 to 5 percent of each credit card transaction on covering associated fees. Look at how your business collects its money, and calculate a target for what you’ll get from a cash discount.
- You would then raise the full prices of the items you are selling by the percentage you’re spending on transactions.
For example, if you spend 4 percent on processing fees, you could increase the full prices by 4 percent.
- Promote a discount worth that percentage value for cash or check-based payments.
Continuing from the past step, you could offer a 4 percent discount on any cash or check-based purchase someone will make.
- Be sure your POS terminals can support cash discounts.
You can use many payment terminals that will review your cash discount and provide it to cash-paying customers. The system displays the customer’s savings if they pay in cash or check, plus the full-price cost for something if someone pays with a credit card.
The POS system you use should highlight the cash and credit-based processes alike. It can also produce a listing on a receipt that includes how much a customer saves on a card payment.
- You must also promote the cash discount to people at the store.
You can have signs at your entrance and payment terminals highlighting an additional discount for paying for something with cash. Don’t say there’s a surcharge for credit card payments here, as the cash discount does not entail any surcharges.
The effort allows people to save money with cash payments, but it doesn’t mislead anyone either. The customer will see the regular prices at a store and that they’re all based on credit card payments. The person can then pay cash to save money.
Why Offer a Cash Discount?
A cash discount is beneficial to your business for many reasons:
- You will pay less in processing fees by encouraging people to pay for things with cash. You could save thousands of dollars a month depending on your adjustments and how much money you bring in through card or cash payments.
- Customers who spend more with cash or check will be likely to do business with you.
- Customers may be more interested in doing business if they know there’s a discount available for cash or check-based purchases. They may also find a new reason to use cash, especially if they are already dealing with card debt-related concerns.
- Your cash flow will improve, as you’ll have more money immediately available for your use. You don’t have to wait a few business days for credit card transactions to go all the way through before you can collect the funds from there.
The best part of a cash discount is that you’re being rewarded. The problem with credit card payments is that your customers are rewarded with frequent flyer miles and other benefits, but you’re being subject to added charges. Credit card networks and merchant service providers have been jacking up the prices of their services, making these card payments even more inconvenient for businesses.
Instead of being forced to cover a card network’s charges, you can control how you’re being charged by offering a cash discount plan. You’ll be rewarded for doing so, just like how your customers are being rewarded when they use their credit cards to make purchases.
How Is This Different From a Surcharge?
You might figure a cash discount program is similar to a credit card surcharge, but it is different. A cash discount entails the prices at your store being for card-based payments. It provides an accurate listing for what you will charge to customers.
A surcharge is different, as you’re listing cash prices in your store. The surcharge would appear after someone chooses to pay with a credit card. The surcharge can be misleading and inconvenient, which is why it is banned in some states and subject to significant limits in others.
Check Your Business First
The last point to know about a cash discount program is that it isn’t always for everyone. You can use a few points to see if you should offer a cash discount system:
- Look at how much you charge on each credit card transaction on average. You may benefit from a cash discount system if people don’t spend as much, as it may be easier for people to pay cash for small-value items.
- Review the design of your business and how often people might use cards. Businesses that are heavily dependent on cards can still use cash discounts, but it may be tough to convince people to go along with it.
- Watch for how much you will increase the prices of your items before sticking with a cash discount plan. Any significant increases might turn off some of your customers, but they won’t be an issue if those people pay with cash in the first place.
Your cash discount program will be beneficial when you look at what is open. Take note of how well this solution can work for whatever needs you hold when processing card payments.