What is Cash Discount?
Cash discount programs have become a popular trend among businesses looking to cut costs while rewarding cash-paying customers, but not everyone is in the loop. Those who have yet to jump on the bandwagon may be asking themselves, what is cash discount, and how does it work? Well, you’ve come to the right place. Throughout this blog, we’ll answer all your questions regarding cash discount programs and how they benefit merchants across industries.
Cash Discount Definition
It always helps to start with the cash discount definition. A cash discount program is a type of credit card processing that allows businesses to offer a discount on their goods or services to customers who pay with cash. If a customer chooses to pay with their credit card, the business can pass the cost of acceptance to the cardholder, allowing the business owner to accept major credit card payments without paying 3-4% in processing fees.
In essence, customers who pay with credit cards will be required to pay their own transaction fee. Paying with a credit card may be convenient for customers; however, it can be costly for merchants. Credit card processing fees can add up quickly, cutting away at a business’s monthly profits. With this type of program in place, businesses can save money while offering a special discount to customers.
Cash Discount Example
This can be answered easily with a real-world example. Imagine a customer walks to a register with $10 worth of goods. The customer sees a sign that says a 5% service charge is added to all purchases except for cash payments. So, by paying with cash, the customer receives a 5% cash discount. The customer has cash available and decides to pay with cash. Their total is thus $10.
The discount applied is a small reward to customers paying with cash. Conversely, if the same customer were to pay with a credit card, their total would be $10.50. The cash discount program allows customers to pay with a credit card, however, it is now the customer’s responsibility to take on the transaction fee.
Are Cash Discounts Safe?
Yes, they are 100% safe and legal in all 50 states. The legality of passing fees to customers who choose to use credit cards for purchases is listed in the Durbin Amendment as a part of the Dodd-Frank Law, which states that businesses are permitted to offer a discount to customers as an incentive for paying with cash.
To stay within the law, however, businesses must ensure that proper signage is displayed clearly and visibly by the entrance and in front of all point-of-sale locations. A clear display of based cost, cash discount, and the total of sale must also be on the customer’s receipt.
What are the Average Credit Card Fees?
More often than not, credit card processing fees fall between the 2-4% range for most businesses. This number will vary depending on what credit card rate a merchant has set to charge for qualified cards, mid-qualified cards, and non-qualified cards. Naturally, every customer is different, so the rate will differ from transaction to transaction. Processing and monthly fees are determined by card types and any additional merchant fees.
What are the Benefits of these Programs?
As a business owner, you need to watch your bottom line at all times. This program can help you do just that, allowing you to retain 100% of sales at the end of the month. At face value, the main benefit of this program is minimizing your monthly credit card processing statement and putting the proceeds back into your business. However, cash discount programs have much more to offer to both your business and your customers, including:
- Lower credit card processing bill
- Seamless program implementation
- Letting customers decide rather than giving them an ultimatum
- No hidden fees or charges when you work with Swiped Unlimited — we’re big on transparency!
Additionally, since you won’t have to worry about fees, you can accept any, and all credit card types, as your cash discount will cover any processing fees you incur. Finally, you can treat customers who pay with cash as royalty; they’re giving you an easy transaction with no fees, so you have an opportunity to give them a discount and turn them into loyal customers that keep coming back.
Ready to Get Started?
Is your monthly credit card processing bill detracting from the profits you work so hard to achieve? Then this program might be just the thing your business never knew it was missing. Want more information? Click here to discover how much you’ll save with our cash discount program with a free complimentary analysis by one of our payment specialists.