If your business accepts credit cards, then you should also offer a cash discount program. At Velocity Merchant Services, we are happy to help our clients to establish cash discount programs of their own. These programs save clients money on their monthly credit card processing fees.
What Is a Cash Discount Program?
Before exploring their benefits, let’s examine what a cash discount program is, and how it can work.
As the name implies, these programs exist when business owners offer a reduced price to customers who pay cash for their goods or services. Generally, the easiest way to do this is to apply a service fee to all transactions and remove that fee at the point of sale when the customer pays with cash.
As you probably know, accepting credit cards can be expensive. As Forbes puts it, “With many credit card companies, each time a customer swipes, they get mileage, cash-back, and other rewards. The store owner typically pays the processing fees with each transaction. In a store with high processing volume, it can be very costly for retailers to process credit cards.”
Some businesses charge a surcharge for using credit cards. This can help offset the processing fees that payment processors charge the business. That solution is not always legal.
The National Conference of State Legislatures says, “Eleven states—California, Colorado, Connecticut, Florida, Kansas, Maine, Massachusetts, New York, Oklahoma and Texas—and Puerto Rico have laws that prohibit merchants from charging consumers with surcharges on credit card transactions. Minnesota prohibits a seller of goods or services that establishes and is responsible for its own customer credit card from imposing a surcharge on a purchaser who elects to use that credit card in lieu of payment by cash, check, or similar means.”
This is why cash discount programs are becoming more popular with businesses. As we explain on our website, “Cash Discount programs are legal in all 50 states. The Durbin Amendment to the 2010 Dodd-Frank Law states that businesses are permitted to offer a discount to customers as an incentive for paying with cash.”
While any business can implement a cash discount program, we’ve found that they work best for companies with an average ticket price of around $10-$15. It’s important to remember that most of the transactions will utilize credit or debit cards, even with an offered discount.
What Are the Benefits of a Cash Discount Program?
Accepting credit and debit cards has become a necessary part of doing business for most companies. As a result, the costs of credit card acceptance have also become standard. And as we said above, cash discount programs are a great way to offset those costs.
In addition, here are some other reasons to adopt a program today:
Eliminate Credit Card Processing Fees
All cash discount programs can offset credit card fees by raising the prices on every transaction. If you raise the price by the correct amount, it can make sure that your margins stay intact (we’ll discuss this further in a moment).
Some credit card processors, like Velocity Merchant Services, offer built-in programs that will completely eliminate their processing fees in exchange for establishing a cash discount program through them.
Reduce Credit Card Chargebacks
Credit card chargebacks can cost you money.
explains: “A chargeback is an action taken by a bank to reverse electronic payments. It involves reversing a payment and triggering a dispute resolution process. Generally, chargebacks occur between a merchant and a credit card issuing bank or a consumer. […] Usually, chargebacks are used to reverse a payment in the case of a billing error, unauthorized credit card use, or failure to deliver a product or service.”
Often, when a chargeback occurs, your payment processing service charges you an extra fee on top of the processing fee you’ve already paid. With more customers using cash, there are fewer credit card payments. So cash discount programs can help reduce chargebacks.
Attract Bargain Hunters
Everyone loves a good deal, and some customers will seek them out. If you offer a discount for cash, then those customers will pick your company ahead of your competition. The best part is that you won’t lose your credit card customers in the process.
As we detail on our website, “Even though customers can save by paying for purchases with cash, 98% of customers will still choose to pay with a credit card. When you implement a cash discount program properly you should not lose any customers.”
Keep Profit Margins Consistent
A challenge of credit cards, traditionally, is that the monthly fees for your merchant account can vary wildly from month to month. If you have a lot of credit card transactions, then your fees will be higher and your margins smaller.
Implementing a cash discount program like ours that eliminates all monthly processing fees lets you better predict your profits month by month.
Increase Cash on Hand
With more customers paying in cash, you’ll naturally have more cash on hand for your business. This will mean less waiting for credit cards to batch out, and for your processor to deposit your funds.
Velocity Merchant Services is excited to introduce you to this new way to utilize our technology. Now you can eliminate virtually all of your credit card processing fees. With our Cash Discount Program, you will not be charged a percentage rate or transaction fee on ANY card you take.
We’ve made our program easy to implement and use. Learn more, or enroll in our cash discount program today.