Are you a local merchant who has suffered due to the recent coronavirus? Hopefully, you didn’t have to close down completely. But even if business has merely slowed, your bottom line could be severely affected. Do you allow your customers to use credit cards for purchases? If so, you already know that you’re paying a processing fee to the credit card company for each and every transaction. This, too, can affect your bottom line. Particularly if you’re a small business.
Cash discounting for retailers helps lessen the burden of processing fees. At the same time, it impresses customers because a discount shows up on their receipt – provided they pay with cash (some stores accept gift cards, checks, and debit cards, as well as cash).
Let’s take a closer look at cash discounting for retailers, how it works, and its benefits.
Accepting Credit Cards
To enable credit card processing, costly fees can be associated with payment technology and integration using today’s digital resources. These fees add up. To still offer innovative tech integrations but avoid costly fees, cash discounting is being done in stores and by service providers.
As an example, independent restaurants and convenience stores – small businesses – take advantage of these programs frequently. Here, there is the potential for high credit card processing fees. But commonly, there is a lower average ticket price. Credit card fees are offset by using a cash discounting system. It greatly encourages consumers to pay with cash, rather than plastic.
Both customers and merchants benefit from cash discount programs. But in order to work effectively, businesses should use the right payment processing and point-of-sale provider, and they also must adhere to a compliant program.
Cash Discount Specifics
It is actually legal, in Florida, California, New York, and a handful of other states, to charge fees to customers using credit cards. The prices posted in these stores are normal prices, and a service fee is added at the end of the transaction – appearing on the receipt – which offsets the processing fees paid by the merchant or service provider.
Cash discounts, on the other hand, work somewhat differently. All of the store prices (or charges for services) are posted with a service fee already added in. This is the price that everyone pays, regardless of what they use to pay with. When a customer pays for a product or service with cash, however, a “cash discount” is applied. This appears on the receipt and is far more appealing to consumers than is a service fee charged at the end of their transaction!
Whereas assessing a service fee at the end of a transaction is not legal in all states, the “cash discounts” program is.
Where both consumers and retailers are concerned, there are any number of benefits to cash discount systems. Here are just a few:
- Debt is reduced – Retailers can enjoy more profit because their credit card processing fees will be reduced. This system also helps reduce credit card debt for consumers because they are encouraged to use cash for purchases, thereby reducing costly credit card interest.
- It’s so easy – For employees, managers, customers, etc., a cash discount program is not only easy to understand, but simple to implement.
- Less in fees – The most obvious benefit to the entire cash discount program is the elimination or reduction of credit card fees. Where small purchases are concerned, credit card interest rates can be avoided for consumers. Where merchants are concerned, processing fees will no longer eat up their bottom line.
TITAN Merchant Services, due to COVID-19, is offering a number of resources to assist the community and its businesses. One such service is the waiving of processing fees during the coronavirus. Click here for details.