Cash Discount Program: A Simple Guide for Merchants

There?s no denying that COVID has had long-lasting effects on all sorts of businesses. But ask the owner of any brick-and-mortar store, and they?ll let you know 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. Furthermore, credit card processing is becoming increasingly expensive for merchants who 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 their purchases while also lowering payment processing charges for business owners.

Curious in case a cash discount program can help your business? Have a look at our simple guide on cash discounting!

What is a cash discount program?
A cash discount program is whenever a business offers customers a monetary incentive to cover with cash rather than using a credit or debit card. This can help lower merchant processing fees for the business enterprise.

Consumers are drawn to card payments for a number of reasons. They are convenient to use, convenient, and often come with incentives like cash return or airline miles. So to get customers more inclined to make cash payments, businesses have to offer them something even better – discounts!

As a way to encourage cash payments, merchants implement cash discounting by waiving the service fee that comes with card payments. Offering cash discounts to customers can result in Tidal Commerce clients saving around 90 percent of their monthly payment services fees.

How does cash discount work?
The best part about implementing a cash discount with a merchant services provider like Tidal Commerce is that the complete process is built directly into your payment terminal. The software was created to encourage your clientele to cover 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 cover with cash or a gift card, that will result in a computerized discount. However, should they elect to continue with a credit or debit card, the standard price which includes the service charge will remain.

The transparency at checkout helps it be 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 need. The result is that the business enterprise owner can pass payment processing fees to the client while also allowing them the chance to earn a cash discount.

Is really a cash discount program legal?
A cash discount program is completely legal across all the states in the US, 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 definitely 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 primary goal of cash discounting for some business owners is to offset their payment processing costs. However, some great benefits of a cash discount program don?t end there. A few of the other merchant benefits could even surprise you.

1. Reduce transaction fees
Just about the most 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 income, you eliminate expensive merchant fees altogether. If 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 include built-in incentives, so getting customers to improve their payment method may take plenty of work. Offering cash discounts will make customers feel like they’re being rewarded for cash payments. This implies you’ll also have faster usage of those funds as you won’t have to await 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 use, including most third-party terminals, will automatically apply the discount, gently encouraging your customer to pay 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 really costly for merchants and can be taken advantage of. Cash payments aren’t subject to chargebacks, and if a cash-paying customer wants a refund, there won’t be chargeback penalties for the business.

5. Please customers
Everyone loves a discount. And for many customers, finding a discount just for paying cash seems like being rewarded for nothing. While some business owners 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 money and pay through their preferred method.

6. Simplify statements
Fewer card payments bring about more straightforward monthly statements for the business. Since the cash discount program is fully implemented into your existing merchant services, there is no drastic change to one’s body.

Cash discount vs. surcharge program
While cash discounts may seem the same as a surcharge program at first glance, what sort of programs operate is completely different, plus 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 along with 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 every fifty states. Surcharges are illegal in ten states and require advance notice to some card brands.

Marketing, baby!
While it may just look like semantics, consumers may behave differently when confronted with a discount versus a supplementary charge. While by the end of the day, most customers will see that charge card processing fees are being passed on in their mind, the marketing of the process makes a big difference. Allowing customers the opportunity to receive a discount will likely be better received than charging a surcharge for charge card payments.

Is cash discounting right for the business?
Certain businesses may be more inclined to consider cash discount merchant processing programs. For instance, hospitality companies offering quick service or casual dining spots will surely benefit from such programs. Other great fits include retail outlets and boutiques that sell clothing, specialty items, or gifts.

While those forms of businesses may be among the best fits, your business may still benefit from cash discounting! If you are not sure be it a good idea for your business, consider the following:

Can you prefer cash payments? A rise in cash payments will also mean an increase in cash on hand. While this minimizes the opportunity of charge card fraud, it could increase employee theft or target burglary. In addition, you’ll be in charge of counting cash every night and ensuring it arrives at the bank safely.

Are similar businesses offering cash discounts? Take note of your competition. If they?re offering cash incentives, then it?s likely a successful initiative that could be beneficial to you. If customers receive a cash discount from your own competitors however, not you, it could drive them to alternative merchants.

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