Is a Cash Discount Program Right for Your Business?

Cash discounts can be an effective way to encourage cash payments and reduce credit processing costs, but may not be ideal for every business. Factors to consider before introducing such a program include: your average sale totals, customer age groups, and competition.
February 06, 2019 3 minute read

Merchant Selling a ProductCash discounts can make a great addition to a business’s credit processing services. These programs, such as MPX’s No Cost Processing, can yield a number of direct and indirect benefits for your business, making them an attractive option for many merchants. Still, as with any other business decision, whether or not to introduce a cash discount program should be carefully considered.

Cash discounts are extremely versatile, and can be incorporated into virtually any type of business, but certain characteristics make them more well-suited for some than others. 

Cash discount programs encourage cash payments by passing credit processing fees, normally paid by the merchant, to the customer, through a service fee on each purchase. The MerchantPro Express No Cost Processing program charges 3.99%, which is deducted from purchases by customers who pay in cash. Thus, cash users receive a discount, and those paying with credit cover what the merchant would have otherwise paid to process the transaction, with the service fee.

While this can be fairly effective in encouraging cash payments from customers, it may give others second thoughts about their purchases. The key to avoiding this is to weigh a number of important factors before making a decision, such as:

Your Average Sale Total

According to the Federal Reserve Bank of Boston, the average cash payment in the United States in 2016 was $22. This means that if your company's average ticket is around this amount, chances are, many of your customers are either already planning to pay in cash, or are willing to switch to cash, with little difficulty. Additionally, the customers who insist on paying with a credit card will likely have little objection to the marginal increase, which, for a $20 purchase, would only be about 80 cents.

This acceptance of the extra fee tends to change, though, if your business deals in high-ticket sales. As you begin approaching the $100 mark on purchases, most customers will be more likely to pay with credit—meaning more opportunities for potential customers to see the service fee as an inconvenience. As the price increases, so too does the perceived significance of the service fee. 3.99% of $20 is just a few extra dimes—easy for a customer to part with in exchange for the convenience of using a their credit card. 3.99% of $200, however, is nearly $8. That same 3.99% now weighs heavier on the customer's mind, and might just be enough for them to reconsider making their purchase.

Your Customers’ Age Groups

Cash discount programs are most effective when customers are already fairly willing to pay in cash. Naturally, those tend to be customers that carry the most cash at any given time. It’s impossible to know exactly what each of your customers has in their wallets when they make their purchases, but a fairly good way to get an idea is by their ages.

If you cater to older generations, particularly those over 50, a cash discount program will likely be a good option. According to a 2016 poll by the analytics agency Gallup, the older your customers, the more likely they are to have cash at all times.

On the other hand, a cash discount program might have limited effectiveness if the bulk of your customer base is made up of Millennials, those aged 18 to 30. This age group, not surprisingly, is the least likely to carry cash, with more than half indicating they feel comfortable without any at all.

Your Competition

Now more than ever, it’s important to be aware of what your competition is up to. Your customers may have any number of options to choose from—online, or even just down the street. Keeping up with competitors and looking for ways to match and exceed their offerings, is critical to your success.

Ask yourself: “Is my competition offering a cash discount?”

If so, then it’s probably a good idea to look into it for yourself. If the answer is no, it might be a good opportunity to differentiate yourself from them—just as long as your business model and customer base are likely to embrace it.

Making decisions for your business is rarely easy. The merchant services professionals at MerchantPro Express are happy to help. Contact us to learn more about No Cost Processing, or any of our other payment processing solutions.

Topics: Merchant Processing

For additional information please call MerchantPro Express at 888-333-1374 or email

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