Credit card processing can come with some hefty fees and is becoming increasingly expensive for merchants. This is especially a challenge for small businesses with small budgets. Interchange fees, otherwise known as swipe fees, can become a financial burden on small businesses when they decide to accept credit cards at their establishment. This is where the cash discount program comes in. If you are a business owner, big or small, you’ve most likely heard about the cash discount program in the merchant service industry. However, this program has come with a fair amount of confusion about what the program is and what it is not. In this article, we will take a closer, more detailed, look at what this program actually is, which will give you the information you need to help decide if this is the right merchant service for your business.
By offering access to a cash discount program to customers who pay with cash, merchants are able to eliminate 100% of their processing fees with the addition of customer service fees on all sales. In this situation, merchants are required to display a customer-pricing notice that will inform each customer about the customer service fee that is charged on all transactions. For example, if a merchant charges a 5% service fee on each item the notice will reflect that a product or service that is listed at $100 will actually be $105 unless the customer is paying with cash. In this case, the customer paying with cash will be discounted the service fee charge and only pay the original $100. Convenience or surcharge fees are not the same as a cash discount program. You may be asking yourself, “Would it not be easier to just settle with increasing the price by 5% and call it a day?” That’s a fair question, and honestly, the result may or may not be the same in the end. However, the transparency that comes along with the cash discount program will be a detail that is not lost on your customers. This program is automated, where surcharge fees are manually calculated and require pricing to be increased across the board, which results in customers always paying “full” price. Customers generally respond favorably to the option of saving by paying with cash. In short, show me someone who doesn’t like to save money on purchases and I’ll show you a liar. Give the people what they want and your business will benefit in return.
The cash discount program can also be a great marketing tool, which can potentially attract new customers. Customers are drawn to the word “sale.” Most stores will display a “sale” sign year round to lure customers into their store. Getting people in the store, sale or not is the ultimate goal. Ideally, they come in for the sale items and walk out with much more. Although a 5% discount across the board helps merchants cover expenses for processing the cash discount program can be a powerful tool when correctly implemented. Being able to eliminate up to 100% of processing fees is something that is extremely alluring to most merchants. This is also something that merchant level salespeople (MLSs) benefit from due to the higher than average margins that come with the program. Although this is an amazing opportunity for the industry, be wary of MLSs and ISOs (International Standards Organization) who are exploiting the program and following less than ethical practices. When choosing a partner for your cash discount program, it is crucial for both the service provider and merchant to properly educate themselves on the details. For the provider, this program can help build a solid portfolio with a low attrition rate and allow you to share industry knowledge on the subject with potential merchant partners. Check Out The Top 5 Cash Discount Processors