As a business owner, it’s critical that you understand what options you have to accept and process payments. One of those top options is Cash Discounting. While Cash Discounting has been around for a few years now, it’s really gained steam in the past few years where merchants have learned how to take advantage and cater this type of processing for their business. We’ll discuss what cash discounting is, how it works and the benefits and potential drawbacks that you might face in its implementation.

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What is Cash Discounting

Cash discounting is a payment processing model where a merchant offers a discount to customers who pay with cash or a check. The discount is designed to offset the fees charged by credit card processors. This model allows merchants to pass on the cost of accepting credit card payments to the customers who choose to use that payment method. In turn, merchants can now focus on receiving 100% of the profits that they have earned when they make their sale on the product or service that they are offering.

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To understand how cash discounting works, it's important to know how credit card processing fees work. When a customer makes a purchase with a credit card, the merchant pays a fee to the credit card processor for processing the transaction. This fee can range from 1.5% to 3.5% of the purchase price, depending on the credit card company and the type of card that’s used in the transaction.

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With cash discounting, the merchant offers a discount for customers who choose to pay with cash or check. This discount is usually equivalent to the amount of the credit card processing fee referenced above. For example, if the credit card processing fee is 2%, the merchant would offer a 2% discount to customers who pay with cash or check. This discount helps offset the cost of processing credit card transactions for the merchants, who can now save money on costly credit card fees.

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Pros & Cons

Many businesses have seen their business revenues grow and spread the word about Cash Discounting to businesses within their networks. Cash Discounting allows merchants to save money on credit card processing fees, which can add up significantly over time and impact business profitability. Reductions in Operations costs are a major plus to merchants who are already operating on razor thin margins. The processing model has transparency built in as merchants and customers alike are all aware of and can understand the exact methods behind the Cash Discount. Merchants are able to stay competitive in their market and offer a convenient and cost-saving payment acceptance to their customers.

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Just like with running any new change in a business, there are potential drawbacks and pushbacks you may get from customers. Most companies will require specialized point-of-sale Technology to help implement Cash Discount. However, at Fides, we offer free card terminals like the Dejavoo Z11 or the Valor VL100, and we set up all the hardware and software that’s required to implement the Cash Discount Program. We are aware of any new rules and regulations that may pop up and always keep our merchants in the loop so they can make the most educated decisions for their business.

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Cash discounting can be a cost-effective payment processing option for small businesses. By passing on the cost of accepting credit card payments to customers who choose to use that payment method, merchants can save money on fees and improve their profitability. However, there are benefits and drawbacks to consider when implementing a cash discounting program. If you're considering cash discounting for your small business, consult with legal counsel, invest in POS technology, train your staff, and communicate the program clearly to your customers. By following these steps, you can implement a successful cash discounting program that benefits both you and your customers.

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