As cash discount is an incentive program that businesses offer to their customers who pay with cash or check instead of credit or debit cards. A business owner can add a customizable service fee to all transactions paid for by credit or debit cards. Customers who pay with cash or check receive a discount because they do not have to pay a fee on their purchase.
The purpose of offering a cash discount is to offset the payment processing costs that major credit card companies charge to a business owner each time a customer pays by credit card. While a cash discount program can be very successful for some businesses, they might not be right for all. Here are a few things to consider if you’re thinking about imparting a cash discount program at your business.
Are cash discount programs common in your area?
Cash discount programs are common in some cities and uncommon in others. If your business is located in a strip mall or shopping plaza where the majority of businesses offer a cash discount, it makes sense for you to offer one as well. Customers will likely expect it from you. But if you’re the only business in the area who offers a cash discount, you might get some complaints from credit the card paying crowd.
Do you have several regular or repeat customers?
If you have a lot of regulars who frequent your business, you’re paying a lot in service fees when they use credit cards. A cash discount program can help offset those fees. Of course, you’ll have to consider that some regulars might not appreciate the sudden change to their bill. If you have a business that relies on tourists or a mixed crowd, implementing a cash discount program won’t affect anyone except you; in a good way.
Is your product or service essential or elective?
If customers are required to buy your product or service, most will appreciate having an option when it comes to payment, even if it does include a small fee. Utility companies, gas stations, and rental companies offer services that people need. If you sell designer purses or sporting equipment, it could cause some customers to think twice before making a discretionary purchase.
What is the typical amount on your transactions?
If a cash discount sounds like a business boosting option that you’d like to implement, consider your transaction size when determining the service fee. Many businesses choose to use a percentage fee, such as 3%, on each transaction. But some businesses do better with a fixed fee. If you own a small coffee shop, for example, a 3% fee on a $3.00 cup of coffee only equates to $0.10. Consider a fixed service fee of $0.25 for each transaction.
Taking these factors into consideration will help you decide if a cash discount program is the best answer for your business needs.