Merchant card processing firms have been promoting “cash discount” programs extensively online in the recent years. To participate in the program, all you have to do is install the right software to your company’s payment terminal, inform your customers of the discount, and accept cash payments instead of credit or debit card payments for goods/services sold. Now, you don’t have to pay the credit card surcharges related to transactions. Sounds easy right? So, why is there so much confusion?
The issue lies in the fact that merchant processing companies often mix up terms like “cash discount” and “surcharge.” This confusion is problematic because surcharge programs are prohibited in ten states. To benefit from legitimate cash discount programs and remain compliant with the law, it’s crucial to understand the differences between these terms, their operations, and what’s involved.
What is a cash discount program? A cash discount is a strategy used by businesses to reduce the expense of credit card transaction fees. Customers receive a discount on their purchases when they pay with cash rather than a credit card.
What is a surcharge? A surcharge is an additional fee that vendors may impose on credit card transactions to cover the costs charged by credit card companies.
What’s the difference? According to Payments Journal, “cash discount programs differ from card surcharges because they do not impose an extra fee on credit card transactions.” Instead, they offer a reduction on the advertised price for customers paying with cash.
Is this legal? Yes. A Cash Discount program allows businesses to offer discounts for cash or check payments without restriction. It defines a discount as “a reduction from the price that customers are made aware of.”
How do credit card companies affect this? Visa and Mastercard regulations require that the listed price for goods and services includes the costs of credit card processing and transaction fees. This means customers are not confronted with unexpected surcharges. The price they see already includes these fees.
Businesses can offer cash discounts because cash transactions avoid processing fees. To comply with credit card rules, simply post a notice informing customers about the availability of a cash discount. This approach can lower overall costs for both you and your customers by approximately 4%.
What does this mean for my business? Some clients worry that implementing cash discount programs might drive away customers. Michael F., a restaurant owner from San Diego, CA, found that his customers appreciated the savings and continued to frequent his establishment. With his cash discount program, Michael saved an extra $3,000 per month in transaction fees, which he uses to cover rising expenses.
Elizabeth K., a retail store owner in Boerne, TX., also saw positive results. After adopting her cash rewards program, she saved an additional $1,500 each month, which she constantly reinvests in her business.
How we can assist Cash discount programs offer benefits for both businesses and customers by reducing purchase costs and credit card transaction fees. If you’re interested in saving potentially thousands of dollars each month with a cash discount program, reach out to us via email. We’ll help you find the best discount program for your business, so call us today. 800-652-3434
