Cash Discounting

Many merchants have been looking to cash discounting to lower their payment processing costs because it’s a far easier way to offset processing costs than meeting the surcharging requirements. Today we are going to go over how cash discounting works and how it can help you offset your processing costs.

It may sound counter-intuitive that discounting a form of payment would help offset the setup costs of another and that’s because it is. The reality behind cash discounting is it allows the business to increase their prices across the board and then not pass that increase on to their cash-paying customers. Effectively when the merchant rings up a sale it gives them the opportunity to promote cash payments by offering a discount to the consumer. For those consumers who pay with another form of payment, they will be paying the increased prices of the goods effectively offsetting the additional cost of their form of payment.

Not only is cash a less expensive way of accepting payments, but cash payments also offer other benefits to the business. As mentioned before it gives the business an opportunity to offer a discount to their customers. Being able to offer a discount is always favorable to the consumer even if they are unable to take advantage of the discount at that time. It also promotes the use of cash by those same customers in the future helping increase the total amount of cash sales. Furthermore, gives more control of the transaction back to the business as consumers paying with cash don’t have the same protections as they would when paying with a credit card.

That doesn’t mean cash discounting is right for all businesses as there are some other sides of the coin that need to be thought about. For one thing, you are going to be increasing your prices slightly which may be a negative for some customers. Your business will be handling more cash which can mean additional bank drops, and/or a higher risk of theft. You will also need to train your staff to communicate the change effectively so cardholders don’t feel like they are being punished due to their form of payment.

Only you can decide if it’s a good fit for your business. If it is then setting up a cash discounting program is pretty simple. These days most point-of-sale systems have the ability to support it, and it’s just a matter of working with your payments and/or point-of-sale provider to set up the software correctly. Most payment providers have programs that help businesses set up and automate a cash discounting program. While this has always been an option for merchants in the past, the truth is for many it was a very manual process.

Please remember cash discounting is different than surcharging and that surcharging has very specific rules behind it. Please see our old article on Surcharging for more information. Also keep in mind that some things may have changed since the writing of the article, but the main idea of surcharging is well outlined.

If you have questions have Cash Discounting or Surcharging we are always here to assist you in any way we can. Feel free to reach out by phone or email.