Whether you're a business owner or not, it's likely you've come across a cash discount program at one point or another. They’re very common at gas stations, and you’ve probably also encountered them at many other small businesses. Given their popularity, it’s natural to wonder if it might be beneficial to introduce a cash discount program for your business. Before making that decision, though, it’s important to understand the benefits of adding a cash discount program to your current credit card processing system.
Below are three major benefits of a cash discount program:
1) Cash discounts encourage cash payments.
This is perhaps the most important reason why businesses choose to introduce cash discounts. Under ordinary credit card processing, whenever a customer pays with a credit card, the merchant is charged a fee to process that credit payment. That's as much as 4% in lost revenue every time they swipe a card!
Introducing a cash discount program, such as MXP’s No Cost Processing program, eliminates that fee for the merchant, by passing it along to the customer if they choose to pay with a credit card. With this cash discount program, merchants can reduce their processing costs by as much as 90%.
While this is clearly beneficial to your bottom line, cash discounts also hold a number of additional advantages. Charging customers less if they pay with cash incentivizes cash payments, therefore increasing cash on hand for your business. Having more cash means:
- Immediate funding access, giving you greater ability to make important business purchases, pay employees, or even take advantage of cash discounts from suppliers!
- Reduced risks of chargebacks. If you accept credit card payments, chances are you know, firsthand, how chargebacks can cost your business significant time and money. Since chargebacks originate from credit card payments, reducing such purchases through a cash discount program lessens associated risks, which could save you plenty.
2) Cash discounts can set you apart from competitors.
With so much competition out there, your customers have more options to choose from than ever before. Distinguishing your business from competitors and offering something they don’t can mean the difference between making the sale or not. Giving your customers an opportunity to save money via a cash discount can be just the edge your business needs to close the deal, and, perhaps even more importantly, keep them coming back.
3) Cash discounts are legal in all 50 states.
There are multiple ways to go about encouraging cash payments from your customers. Not all of them, however, are always allowed. Surcharges, for example, perform a similar function to cash discount programs—incentivizing cash payments by applying an additional fee to customers paying with credit cards (whereas cash discount programs apply a service fee to all customers and then discount that fee from those paying in cash). While surcharges are illegal in many states, cash discount programs are legal across the country, so you won’t have to worry about your program violating any laws.