If you own a small business, you know how often people use credit or debit cards for payments. Online shopping has made this payment method even more prominent, as it requires people to pay with a card. These days, it may seem like cash is obsolete. A cash discount program may sound old-fashioned. But, there are still several benefits to these approaches.
Although cash is less popular than in years past, more than half of Americans still use cash for some weekly purchases. As it turns out, incentivizing customers to pay with cash can benefit your business.
Using a cash discount can help you avoid credit card processing fees. In doing so, you can stop worrying about charging a surcharge for credit card payments.
How a Cash Discount Works
Depending on your age, you may not remember when cash discounting was a common practice. This practice exists to help you avoid credit card processing fees.
How does that work? In short, your business incorporates the cost of credit card processing into its listing price for all items in your inventory. So, if somebody pays with their card, this payment won’t affect your profit margins.
This method helps you avoid using a surcharge. A surcharge requires you to charge more than the listing price for an item to cover credit card processing fees. Instead, this approach incorporates those processing fees into your listing price.
This distinction matters because some states ban payment surcharges. A surcharge could get you into legal trouble if you live in those states.
So, where does the cash come in? Essentially, incorporating processing fees into your listing prices allows you to charge less for cash purchases. You can do this because the purchase won’t require any processing fees.
Reducing Fees for Your Company
One of the main cash discount benefits is that this practice reduces the number of processing fees your business must pay. This approach alone can save significant money.
Most companies hire MSPs (Merchant Service Providers) to handle their credit card processing fees. These businesses charge fees to cover the services they offer. Likewise, businesses must also pay banks or credit card associations who take the fees you pay.
Paying these companies is only fair. However, paying them too much can cause your profit margins to dip. So, why not reduce those fees with a cash discount program?
Keeping Your Profit Margins Stable
Budgeting is the lifeblood of any business. Your budget allows you to plan for growth and determines how much you can spend in the present.
However, it’s impossible to create a budget plan without accurate numbers. And unfortunately, credit card processing fees can make these numbers challenging to find.
Without a cash discount program, you may continue to pay more than you expect on processing fees. Likewise, you may have to pay different types of fees depending on the cards your customers use. In return, your business suffers and struggles to budget accordingly.
Instead, consider using a cash discount program. This way, you can eliminate some of those fees. Also, this program forces you to incorporate processing fees into your listing prices.
As a result, you can know exactly how much you earn from your sales. Imagine how much easier it will be to budget!
Attracting Bargain Seekers and Couponers
Businesses aren’t the only things that thrive on budgeting. Several individuals and families continue to use couponing tricks and rewards systems to save money on their weekly shopping.
Offering a cash discount can attract those people. After all, who doesn’t love a sale? These customers will leave your store feeling like they received an excellent deal.
In fact, adopting a cash discount program can distinguish you from your competitors. Consider how many of your competitors use cards almost exclusively. Offering a discount like this can help you earn more money than these other businesses and attract more customers.
Increase the Amount of Cash Your Store Has
After the coronavirus outbreak, there was a shortage of coins and paper cash throughout the US. This shortage made it challenging for companies to offer change to their customers. So, instead, they had to request that customers pay with cards unless they had exact change.
Can you guess the problem with that strategy? Bingo! Businesses in states that ban surcharges often experience extensive card processing payments.
If you run one of those businesses, you know how valuable cash can be. So, why not use a strategy that allows more cash to exist in your store?
Offering a cash discount program increases the amount of cash available in your store. This way, your employees can provide change to your customers with relative ease.
Cash can also help you purchase equipment more easily. However, it’s worth noting that most MSPs provide funds from your credit card transactions. This is another way that businesses receive the amounts of cash they need.
Cutting Back Chargeback Risks
Sometimes, credit card transactions include additional fees alongside those automatically generated by card payments. As a result, customers may review their receipt and think something is incorrect.
When this happens, they may challenge the statement to improve their credit scores or to restore lost money. This challenge requires businesses to spend money on various parties to verify that their final charge was correct.
This process can be time-consuming. Unfortunately, it often happens several times each year. So, why not adopt a policy that could reduce these occurrences?
Challenges like these only occur with credit card payments. So, incentivize people to use cash instead of credit cards. This way, both parties can save themselves the hassle of dealing with a challenge.
Avoid a Surcharge By Using a Cash Discount
Offering a cash discount is an excellent alternative to a surcharge. It can provide more stable profits to keep your business healthy and thriving. So, consider using this strategy to increase your profits and benefit customers!
However, offering a cash discount is not the only way to simplify your payments. You can also work with us to receive help with your budget and make your business more convenient.
We offer several services, ranging from invoice templates for your customers to a virtual terminal. If those services appeal to you, then excellent! Contact us today to learn more.