Guide For Merchants: How Does A Cash Discount Program Work?

Cash Discount Program Work

The idea of deferring your credit card processing costs to customers is nothing new, but cash discount program represent a very unique approach because they are one of the few ideas to be fully supported by the federal government and codified in law. As a result, companies following the federal guidelines are assured they will not be challenged by regulators or credit card industry operators the way they sometimes were when innovating ways to control costs in the past. Additionally, cash discount programs are good in the long run because they look like savings to your customers, who see the opportunity to shave a couple bucks off a transaction by bringing cash and often respond. So how do you get started?

Program Requirements

The basic requirements for a cash discount program are simple. You need to price everything in the store according to the higher price paid by customers using credit cards and other electronic payment methods. Then, you need to create signage notifying customers of the cash discount program, including information about how much the price is discounted when the customer chooses to pay with cash. Employees also need to be taught to communicate these details, and your equipment needs to be set up to calculate the discount and change the final price on the receipt when a cash payment is rendered instead of an electronic one. Most new systems support this program, even specialty systems like automotive point of sale software aimed at the repair shop industry.

Pricing Logistics

The key to a successful cash discount program is figuring out the right price point for your discounted sales. The pricing needs to deliver the margins you expect on a sale, taking into account the basic overhead costs apart from credit card processing. That way, when you increase the cost by the rough amount of the transaction processing costs, the result is a predictable margin no matter how the customer chooses to pay.

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Communicating With Customers

The hardest part is putting the program into place, and this is where communication with your regular customers is the key to success. Sometimes, customers view programs that pass on card processing costs as a price increase, especially when your price calculation forces you to change the sticker cost on some items. Remember, the program is a discount. Realistically, any price changes you make are tweaks that would have been necessary either way. This way, though, the savings are passed on to the customer when they opt for cash payment.

Contact a Processor To Get Started

If you need updated equipment, a credit card processor is your go-to point of contact for updated POS options like the Clover 2. They can also talk you through setting up the discount in your existing POS if it supports the feature. If you’ve been thinking about making a jump to a career in merchant services, many of them are also recruiting for roles in reseller programs, which could provide you with an alternative line of income to supplement your business.

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