The Pros of Cash Discounts
Reduce Fees – Obviously, the biggest pro is reducing or eliminating up to 100% of card processing fees associated with accepting credit cards.
Easier to implement and explain than a credit card surcharge – Another way some merchants try to isolate and pay for card processing is to assess a surcharge on products bought with a credit card. That has its own set of challenges though. For instance, it’s illegal to add a card processing surcharge in 10 states. Implementing a cash discount, though, is legal everywhere. It’s pretty easy to explain that all items in the store are priced with a built-in service fee, but that the fee is deducted if you pay with cash.
Encourages cash payments – Although many people prefer credit cards, a cash discount may encourage a customer to use cash instead of a card for their purchase. These means less time between the sale and when you have access to the funds. There is no processing time or wait period for cash in your hand. Plus you eliminate some fraud exposure.
Reduce chargebacks – With fewer people using cards in your store, it’s likely the number of chargebacks will also decrease. If this has been a problem for your business, this decrease may actually help reduce the card fees you do pay, because you’d be perceived as less of a risk.
The Cons of Cash Discounts
Some customers may not carry cash – Just as 33% of people prefer to use their cards, lots of people simply don’t carry cash anymore. If a customer is opposed to making a purchase without getting a discount, they may walk out without buying anything.
Conspicuous signage – To offer cash discounts, you must post what the law refers to as “conspicuous signage” throughout your place of business to let customers know they can receive a discount if they pay by cash or gift card rather than via a credit card (Which VizyPay provides to you at no cost). Also, while expressed as a discount and not as a fee, some customers may view the posted “offer” in a negative light.
Implementation – To be compliant with a cash discount program, your receipts must clearly reflect that there is a service charge. That means revising your POS system software or utilize a terminal VizyPay provides that automates the process for you. Plus you’ll want to be sure you follow any changes in the laws around cash discounts in the future to avoid any penalties.
Potential Drop in Sales – Multiple studies have show that consumers spend more when using their credit cards. If cash appears to be a more attractive option in terms of managing credit card processing fees, be aware that it could end up discouraging and depressing your overall sales results.
If you chose to implement a cash discount program, make sure you go into it with your eyes open. Follow the rules closely to avoid issues and penalties, and be sure to evaluate the success of the program against any hit to sales you may experience to be sure the program is working for you.