Business owners must be smart to be successful. Being smart means being on top of the latest trends in your industry. One trend that has been a successful endeavor for businesses around the world is the cash discount program.
If You Accept Credit Cards, You Can Offer A Cash Discount
Cash discount programs have been used in Europe for decades, and many companies in the U.S. have used them for years. Smart business owners understand that a cash discount program can be just the ticket to building a better business.
Traditional credit card companies charge your business a processing fee for every credit card transaction. These fees can pile up quickly on the business owner and deplete the profit margin. You can’t stop taking credit cards for purchases, but you can offer a discount to customers who pay with cash. This will eliminate your credit card processing fees by transferring those fees to the customer who still pays by credit card.
How Do Those Fees Add Up?
If you own a business, you likely process many credit card transactions daily. This might make life easier on your customers, but it can make things harder on your bottom line. Let’s say your average sale amounts to $10. Traditional credit card processing typically charges you 4% on every credit card transaction. This means that you would lose $0.40 on that $10 sale.
$0.40 may not sound like a lot of money, but those fees pile up. If you have 100 sales every day, you lose an average of $40 on a daily basis. That’s $1,240 in a 31-day month. With a cash discount program, that money stays with your business.
How Does This Build A Better Business?
The basic premise of a cash discount program is that customers who use a credit card will pay for the convenience of doing so. Don’t confuse this with a surcharge; surcharges are illegal in most states. A cash discount program works by offering an incentive to pay with cash by adding a small service fee on all credit card transactions. The 4% fee that the credit card company charges you for each credit card transaction will now be paid by the customer.
Each time a customer makes a purchase with their credit card at the terminal, the 4% service fee will be added automatically. That fee will go directly to your processing company who will use it to pay your monthly fees. Now you don’t have to pay a thing!
Those who pay with cash will not receive a service fee added to their bill because you don’t pay a processing fee to accept cash payment anyway. It’s a win-win situation that makes you a smart and savvy business person who’s building a better business.