Implementing a Cash Discount Program
As a business owner, you’re dishing out a lot of money to keep your business running. Inventory, employee salaries, rent, utilities, the list goes on. Arguably the most frustrating cost of them all is the processing fees that come along with your credit card machine.
Wouldn’t it be great if there was an easy solution to lower credit card processing fees? Well, by having a cash discount program you can lower or even get rid of your credit card processing fees all together.
So how do you do this? When a customer buys something with a credit card, they are responsible for paying the fee that comes along with processing a credit card. You can either choose to have the customer pay all of the fee or a portion of the fee.
The fee is applied like a tax and is visible on the receipt. When the customer pays with cash, there is no processing fee that needs to be paid. As a result, customers that pay with cash end up paying less than a customer paying with a card.
A cash discount program is a great way to incentivize customers to pay with cash and lower credit card processing fees. This also helps to streamline the checkout process and increase cash flow. Since customers are encouraged to use cash, this can also minimize the risk of chargebacks and fraudulent activity on credit card transactions.
Avoiding Issues with Cash Discount Credit Card Processing
Customers may not understand the fee applied to credit card transactions and the discount for cash. So make sure you are clearly explaining the reasoning to the customers and having the fee clearly visible to avoid confusion.
Implementing a cash discount program could be seen as discriminatory towards customers who prefer to use credit cards. More people are using things like Apple Pay and Google pay for convenience. Also, many places of business are going completely cashless.
The cash discount program might cause frustration for customers. It’s important to weigh your options and decide on whether or not you want to charge your customers for the entire processing fee or just a portion of it. Even if you charge the customer a small percentage, you’re still lowering your overall credit card processing fee.
Another thing to pay attention to is making sure you’re not confusing a cash discount with a surcharge. A surcharge is a fee that is added to the price of an item or service when the customer pays with a credit card. There are several states that do not allow surcharging so it’s important that you understand them both.
Following the Rules While Lowering your Credit Card Processing Fees
There are several federal laws that apply to cash discount programs, including:
Truth in Lending Act (TILA)
This law requires merchants to clearly and accurately disclose the fees applied to credit card transactions and the discount for cash.
Electronic Fund Transfer Act (EFTA)
This law governs electronic transactions, including credit card transactions, and sets standards for disclosure and consumer protection.
Fair Credit Billing Act (FCBA)
This law provides protections for consumers when using credit cards, including the right to dispute fraudulent or incorrect charges.
Credit Card Accountability Responsibility and Disclosure (CARD) Act
This law sets standards for credit card issuer practices and provides protections for consumers, including rules for disclosure of fees and interest rates.
Dodd-Frank Wall Street Reform and Consumer Protection Act
This law provides additional protections for consumers using credit cards, including rules for disclosure of fees and restrictions on certain types of fees and charges.
It’s important for merchants to understand and follow federal laws when having a cash discount program, to make sure the program is following federal regulations and to protect their business and customers. A cash discount program is legal in all 50 states but it’s important to make sure you’re covering all your bases.
Checklist for your Small Businesses Cash Discount Credit Card Processing
- Determine your processing fees: Calculate the average fee you pay for each credit card transaction, so you can decide on the fee amount to apply to credit card transactions in your cash discount program.
- Set the cash discount: Decide on the amount of the discount to offer for cash transactions. This discount should be equal to or greater than the average processing fee you pay for credit card transactions.
- Choose a software solution: Select a software solution that can automatically calculate and apply the fee and discount to transactions, and integrate with your point-of-sale system.
- Train your staff: Train your staff on how to implement the cash discount program and how to handle any questions from customers.
- Advertise the program: Clearly advertise the fee applied to credit card transactions and the discount for cash, including posting signs in your store and providing clear information on receipts.
- Monitor and adjust the program: Monitor the effectiveness of the program and make adjustments as needed, such as changing the amount of the fee or discount.
VMS Will Help You Get Started With a Cash Discount Program
Overall, having a cash discount program is the easiest way for business owners to lower credit card processing fees. Having a cash discount program in your place of business keeps the revenue in the business owners’ pocket and out of the hands of big credit card companies.
Little fees add up and losing money because of credit card processing fees is not only annoying but also completely avoidable. Here at VMS, all of our equipment is cash discount ready.
When you receive your cash discount equipment from us it will come pre-programmed to automatically calculate the cash discount. Additionally, we will also provide signage for your store so your customers are aware of your new Cash Discount Program.
We will also train your employees on how to use the new Cash Discount equipment and how to explain this new program when your customers ask.
Fill out the form below or Click Here to get started. Additionally, you can call us directly at 888-902-6227.