Businesses are always looking for creative, out-of-the-box ways to save money and boost revenue. Very often, they think this comes down to selling more, or increasing the prices of their current offerings. While that's always an option, there's indeed another way to improve your bottom line: cash discounts.
Cash discount is an intelligent and increasingly popular business solution that enables merchants to reduce, or even eliminate, revenue loss due to credit card processing fees, by shifting this cost on to the customers. This can make a huge difference for small business owners who value every penny they can earn.
Let's dive into the details a bit more.
How a Cash Discount Program Works
Here's what you need to know about how cash discount would work for your business.
The business publishes a credit card rate as the shelf price, and customers who pay in cash will receive a discount, while those who pay with credit cards or other payment methods will pay the price as published. This transaction will be even more convenient with a POS system, which helps to automatically calculate the final price to be charged to the customer. No manual work is required on your end.
Essentially, you reward people for paying in cash. And if they use a payment method that comes with additional fees, the customer is responsible for the fee — not you.
Importantly, cash discount programs is not to be confused with surcharging.
The main difference between the two is how the price is communicated to the customer. In cash discounts, customers who pay in cash or debit will pay lower than the regular price stated on the shelf or menu. In surcharging, customers who pay using a credit card or other non-cash or non-debit methods will pay more than the rate on the shelf or the menu.
The outcome is mostly the same; but how you arrive there is different.
As there is a difference in pricing depending on the customer’s preferred way of paying, some businesses that offer cash discounts opt to go the extra mile of transparency by posting both the cash and credit card rates on the shelf. This approach is acceptable as well. It’s also important to note that cash discounting is accepted in all states, thanks to the Durbin amendment of the Dodd-Frank Act, but surcharging is prohibited in several states, such as Colorado, Kansas, Massachusetts, Connecticut, Maine, and Oklahoma.
The Benefits of Offering Your Customers Cash Discount
Several benefits come with offering cash discounts, making it a prevalent business move for retailers, restaurant owners, and other small businesses. Some of these advantages are:
- Direct access to cash flow: Your business will have a reserve of money on-hand, as customers are incentivized to pay with cash more often, which means immediate revenue for your business, as opposed to waiting for credit card transactions to be cleared.
- Increased revenue: Since the cost of payment processing will be shouldered by the customers who choose to pay via credit cards or other non-cash routes, the savings gained can be considered additional profit and funneled into other business needs.
- Simple pricing and billing statements: A good cash discount program makes its pricing method and billing statements easy for business owners to understand.
- Positive customer perception: Everyone loves discounts! Customers will develop a good opinion of your business as they can pay less by paying in cash, and a positive transaction at the till may entice the others in line to pay in cash as well. It's a win-win for all involved.
With the right POS system, the entire process of offering cash discount can be streamlined and automated, meaning all you have to do is sit back and enjoy the extra money in your business's pocket.
How True POS Can Help
Roll out a cash discount program for your business with True POS. A trusted name in point of sale systems, True POS is your one-stop hub for innovative and affordable payment processing solutions.
TruePOS empowers business owners to set the discount amount that will fairly offset the cost of credit card transactions. Our cash discount program is compatible with both POS systems and basic terminals, so it’s easy to integrate and implement straight away. True POS prides itself on outstanding customer support, so our team will be with you every step of the way to get you set up as soon as possible.
To get started, your business will need to meet the following criteria:
- The business is a service, restaurant, or retail business.
- It manages a minimum of $4,000 in credit card transactions per month.
- The business has been active for over 12 months and has a minimum of 12 months remaining on its lease.
- The business is in good standing and not bankrupt.
In compliance with federal laws, True POS requires the following documentation from business owners who intend to implement cash discount programs: a signed Cash Discount Merchant application, relevant banking documents (such as a voided check or signed bank letter), past processing statements if they are available, and a copy of the business owner’s valid ID (such as a driver’s license).
Once these are all secured, True POS can help you get started in as short as 24 to 48 hours.
Are you ready to take the next step and improve your customers' experiences — and your business's bottom line? Contact True POS today to get started with a free quote.